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Published: May 25, 2020 at 5:48 a.m. ET, By Chris Matthews<\/p>\n
The time has long passed for Washington to force Chinese companies to provide the same investor protections that U.S. companies have for decades, says Democratic Rep. Brad Sherman of California, who is leading the effort in the House of Representatives to force Chinese companies to submit to U.S. securities laws, or be barred from raising money in U.S. financial markets.<\/p>\n
\u201cThe purpose here is not to delist or de-register; it\u2019s to demand that China do what every other country has done and agree that if their companies want to participate in U.S. capital markets, they agree to live by U.S. capital-markets rules,\u201d Sherman argued in an interview with MarketWatch. \u201cIt\u2019s time for China to blink first for the benefit of investors.\u201d<\/p>\n
See also: An emerging-market debt crisis could be the next front in U.S.-China conflict<\/a><\/p>\n Sherman introduced a House version of the Holding Foreign Companies Accountable Act Wednesday night, after the bill passed<\/a> the Republican-controlled Senate earlier in the day with unanimous support.<\/p>\n The bill would require that foreign companies let the Public Company Accounting Oversight Board oversee the auditing of their financial records if they want to raise money by selling stocks or bonds to the American public. All U.S. companies and most foreign entities already work with the PCAOB in this way, but Chinese companies do not.<\/p>\n The PCAOB was created by the 2002 Sarbanes-Oxley Act, in response to the collapse of companies like Enron and WorldCom, after the auditors of those companies failed to uncover financial deception. The PCAOB\u2019s role is to audit the auditors and provide another layer of protection for U.S. investors.<\/p>\n That bill was never intended to exempt foreign countries, Sherman said, but the financial-services industry lobbied to list companies from China, the world\u2019s fastest-growing large economy. As investor demand for Chinese securities grew, the Securities and Exchange Commission came to a compromise with Chinese regulators in 2013 that paved the way for widespread listing of Chinese companies, including stock offerings by technology giants like Alibaba Group Holding Ltd. BABA, Baidu Inc. BIDU, and JD.com Inc. JD.<\/p>\n Don\u2019t miss: Congress could kick China listings off U.S. stock exchanges, but it won\u2019t happen overnight, giving Chinese companies breathing space to weigh response<\/a><\/p>\n The 2013 agreement was supposed to lead to the PCAOB\u2019s getting greater access to Chinese auditing documents, but \u201cChina backslid on their commitments,\u201d Sherman said. \u201cBasically China got tough and we got weak.\u201d<\/p>\n Sherman introduced a similar bill last year<\/a>, but as anti-China sentiment has grown in Washington, he said that there is now bipartisan support for measures like this one that were once only supported by factions skeptical of the U.S. financial industry. With growing anti-China sentiment, he thinks his bill will pass before the end of the summer.<\/p>\n