The Trump administration made another move against China this week as tensions with the Asian giant continue to escalate.
According to a Wall Street Journal report, the Trump administration announced a plan Thursday that would require Chinese companies that are traded on U.S. stock exchanges to be de-listed if they fail to comply with U.S. accounting rules by 2022.
Just the News reported in May that the reason why Chinese firms are currently able to flout U.S. regulations is found in an exemption they were granted under former President Barack Obama.
According to the terms of a Memorandum of Understanding signed in 2013, the Public Company Accounting Oversight Board (PCAOB) and the Securities Exchange Commission (SEC) do not hold publicly traded Chinese companies to the full requirements of the Sarbanes-Oxley Act — legislation that was passed in 2002 to protect investors from inaccurate audits and financial information.
PCAOB: “Chinese cooperation has not been sufficient”
However, the PCAOB complained in a recent statement that Chinese businesses and government regulators have been abusing the arrangement.
“We remain concerned about our lack of access in China and will continue to pursue available options to support the interests of investors and the public interest through the preparation of informative, accurate, and independent audit reports,” the statement said.
“The PCAOB spent significant time and resources negotiating a Memorandum of Understanding (MOU) with the Chinese authorities for enforcement cooperation,” it continued.
“Unfortunately, since signing the MOU in 2013, Chinese cooperation has not been sufficient for the PCAOB to obtain timely access to relevant documents and testimony necessary to carry out our mission consistent with the core principles identified above, nor have consultations undertaken through the MOU resulted in improvements.”
“We continue to address these issues with Chinese regulators, and whether we will obtain equivalent access remains an open issue,” the PCAOB pledged.
Not good enough
That wasn’t good enough for members of the Committee on the Present Danger: China, a bipartisan organization decrying the special favors that China has been getting. “Put simply, Chinese companies are today receiving preferential treatment over their American corporate counterparts on your watch,” the group said in a letter to the head of the SEC and PCAOB.
“We welcome the President’s decision and strongly second the concerns he has rightly expressed about the lack of transparency, PCAOB covered audits and material risk disclosure by Chinese companies in our capital markets.”
This announcement comes shortly after Trump signed executive orders to ban popular Chinese apps TikTok and WeChat over national security concerns. The bans are set to go into effect in September if their Chinese owners do not sell them.