Mon, 27 Sep 2021

WASHINGTON, D.C.: Changes in reporting procedures will now require Chinese companies listed on U.S. stock exchanges to disclose the risks posed by the Chinese government interfering in their businesses.

This follows Chinese regulators beginning a probe of ride-hailing giant Didi Global last week. The Chinese announcement came days after its $4.4 billion New York listing, causing it to lose 25 percent of its share price.

Recently, Chinese authorities have tightened regulations on other U.S.-listed Chinese companies.

Additionally, China has announced that tutoring firms must become non-profits, including New York-listed TAL Education Group (TAL.N) and Gaotu Techedu Inc (GOTU.N).

Some U.S. policymakers are concerned that Chinese firms are violating U.S. requirements for public companies to disclose to investors a range of risks to their businesses.

"Public companies must disclose significant risks which, for China-based issuers, may sometimes involve risks related to the regulatory environment and potential actions by the Chinese government," said SEC commissioner Allison Lee, as quoted by Reuters.

The Wall Street Journal earlier reported that Didi had been warned by regulators to delay its initial public offering and to address its cyber security.

Lee has not disclosed whether the SEC had begun a probe of Didi for not providing adequate disclosures.

"We should always be focused on ensuring investors are fully informed of material risks, such as the risks we've seen recently related to China," Lee said.

Last year, Congress passed legislation that would remove Chinese companies from U.S. exchanges unless they adhere to American auditing standards.

"U.S. regulators must ensure that American investors and workers are protected from the sort of non-market behavior that is leaving American investors scorched," Senator Bill Hagerty, who sits on the Senate Banking Committee, said in a statement to Reuters.

"This includes enforcing compliance with Public Company Accounting Oversight Board audit requirements, as well as investigating whether there have been sufficient disclosures about the serious potential investment risks associated with such a centrally-controlled economy," Hagerty said.

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