Is Delisting Chinese Companies from the US Stock Market a Good Idea?

Is Delisting Chinese Companies from the US Stock Market a Good Idea?

Is Delisting Chinese Companies from the US Stock Market a Good Idea?

The coronavirus pandemic has proven to be a global challenge for every nation on earth.

In the middle of the health and economic turmoil caused by the virus is the United States, the world’s largest economy and the most influential nation in practically all ways. The number of infections in the latter is breaking new records, remaining the most affected country on earth. Nevertheless, the federal government keeps making unpopular decisions that might have a significant negative impact on the US economy and its sustainability throughout these difficult times.

One of the most significant political approaches that the United States has been taking over the past few years is the trade war with China, the second-largest economy in the world, and a driving force of the Asian continent. The US-China relations have been rather tense ever since the country emerged from the ashes of the past. Nevertheless, the trade remained strong and benefited both of the nations with the total volume exceeding those of any two other countries.

From the year 2016, as president trump took the oval office, the tensions became much more visible. Open declaration of the trade war became the turning point for the recent history of relations between China and the United States. Afterward, over the course of a couple of years, the White House made a number of contradicting and often aggressive statements, threatening the Chinese government. Famously, the US government imposed a number of restrictions on Chinese and China-affiliated companies, limiting their work within the United States. This has oftentimes fostered the exchange of currencies in both countries. The direct and indirect quotes on trading terminals keep constantly shifting considering the political situation at a given time. Currency values have been jumping around significantly every now and then but particularly when the government announces a new measure or president makes a bold statement. 

Notably, one of the biggest controversies was sparked by the ban on the popular Chinese mobile manufacturer Huawei. The company gained momentum in the United States, selling millions of devices. Yet, following the ban from the government, the company was forced to leave the market, abandoning their already-existing clients. Google stopped supporting the hardware produced by Huawei and recently, President Trump extended the ban on Huwaei until 2021, despite the current major economic turmoil.

What Has the Government been Planning to Do during the Quarantine?

In the midst of the global pandemic, the US government continues its endeavor to fight against the Chinese commercial and state influence over the nation. The first question is whether such influence exists at all or not, but that is a deeper question and we will just skip it. Instead, the interesting thing is that the government has been boiling something potentially harmful throughout the peak of the pandemic in May. A couple of months ago, the state senate passed the bill that could potentially prevent many major Chinese companies from listing their stocks on US exchanges.

What is the current situation? There currently is $1.8 trillion worth of market capitalization in the United States through Chinese companies. This sum is extremely big even for the superpower the US is. If the bill becomes fully effective, 230 Chinese companies that are listed on the New York Stock Exchange and Nasdaq would be forced to leave the country, taking limitless opportunities away from the potential US investors. 

What is the aim of the bill? The prime goal is to limit the access and number of Chinese mega-companies based in the United States. This is being done in efforts to curb the influence the country has on the United States whilst reducing the import from China and supporting local manufacturing. Sadly, steps are being taken without any preparatory work or proper evaluation of whether the US manufacturing sector is able to support the potential loss of Chinese imports or not.

Delisting Chinese Companies from US Markets will be Counter-Effective

The Peterson Institute for International Economics in their recent research says that delisting Chinese companies from the US markets is simply pointless. It will not limit their access to the US capital market, simply because it is global in the 21st century. The access will not be blocked whilst the United States will lose potential investment opportunities from some of the world’s largest corporations.

Moreover, the important factor is that the majority of big Chinese companies in the United States have also listed themselves in other markets, notably Hong Kong. The latter is the financial center of Asia with one of the largest exchange markets on earth. This ensures that those who decide to choose Hong Kong as the US substitute will have guaranteed access to some of the largest investors in the world.

The think tank says that the involvement of the US citizens in Chinese companies cannot be limited. The stock market is not the last place people and businesses can interact. Forex trading platforms like Axiory are open to citizens on both sides of the conflict. Representatives of the company say that the volume of currency exchange between the two nations has been skyrocketing over the past few years. Moreover, the Peterson Institute for International Economics also asserts that those who want to purchase Chinese stocks will still manage to do it freely through Hong Kong, London, or Singapore.

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  • Danny Berk

    Instead of blaming China, our government should better focus on tackling our internal problems.

  • Simon Lee

    China is an easy scapegoat....

  • Tom Francis

    We have got nothing to win by escalating tensions with China

  • Michael Stapleton

    They are just threatening... They won't delist....

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Natalia Revishvili

Financial Markets Expert

Natalia is an experienced financial professional with strong digital and interpersonal skills. Her main areas of interest are financial markets news and digital disruptions, which profoundly impact the global economy as well as our personal lives.

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