Banning Chinese Companies from Stock Exchanges: Does It Make Sense?
Published in Frankfurter Allgemeine Zeitung
(Germany) on 12 August 2020
by Winand von Petersdorff (link to original)
(Germany) on 12 August 2020
by Winand von Petersdorff (link to original)
Translated from
by Zahra-Claire Bahrani-Peacock.
Edited by Helaine Schweitzer.
Washington requires companies to comply with accounting standards. However, sanctions that make little difference and that harm the U.S. financial center will not pave the way to success.
What is the U.S. government trying to achieve by threatening to ban Chinese companies that do not comply with accounting standards from U.S. stock exchanges?
One could interpret the threat as a move to protect shareholders. However, this cannot be the reason, as Chinese companies listed on U.S. stock exchanges profit the most from professional investors. These investors have a professional obligation to know what they are getting themselves into when they spend money — and occasionally they succeed at this. What’s more, these professionals have not asked for help in analyzing the balance sheets of Chinese companies. They rely on their own instincts and on the auditor’s opinion.
Nor would a ban achieve a possible political goal of preventing Chinese companies from accessing U.S. capital. Capital may take tortuous paths before reaching its destination, but there are different options. Trading on alternative stock exchanges or in the private equity market would be just as simple.
Of course, Beijing could also simply allow auditors to look at the books. Nevertheless, sanctions that make little difference and that harm the U.S. financial center will not lead to success.
What is the U.S. government trying to achieve by threatening to ban Chinese companies that do not comply with accounting standards from U.S. stock exchanges?
One could interpret the threat as a move to protect shareholders. However, this cannot be the reason, as Chinese companies listed on U.S. stock exchanges profit the most from professional investors. These investors have a professional obligation to know what they are getting themselves into when they spend money — and occasionally they succeed at this. What’s more, these professionals have not asked for help in analyzing the balance sheets of Chinese companies. They rely on their own instincts and on the auditor’s opinion.
Nor would a ban achieve a possible political goal of preventing Chinese companies from accessing U.S. capital. Capital may take tortuous paths before reaching its destination, but there are different options. Trading on alternative stock exchanges or in the private equity market would be just as simple.
Of course, Beijing could also simply allow auditors to look at the books. Nevertheless, sanctions that make little difference and that harm the U.S. financial center will not lead to success.
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