Banning Chinese Companies from Stock Exchanges: Does It Make Sense?

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.

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About Zahra-Claire Bahrani-Peacock 20 Articles
I grew up in the UK, moved to Germany at 18 to study translation and interpreting, and then on to Spain after completing the course to deepen my knowledge of the Spanish language and culture. I (and consequently also my cat …) am now fluent in three languages and have dedicated the past two and a half years to language, translation and interpreting.

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