The New York Stock Exchange (NYSE) has announced that it is delisting Chinese companies with ties to the Chinese military. The three firms are all state-owned enterprises operating in the telecom industry: China Unicorn (Hong Kong) Ltd., China Telecom Corporation Ltd., and China Mobile Ltd. These companies will have their securities suspended from all trading activities permanently between Jan. 7 and 11.
“NYSE Regulation reached its decision that the Issuers are no longer suitable for listing pursuant to Listed Company Manual Section 802.01D in light of Executive Order 13959 (the “Order”), which was signed on November 12, 2020… The Issuers have a right to a review of this determination by a Committee of the Board of Directors of the Exchange. The NYSE will apply to the Securities and Exchange Commission to delist the Issuers and securities upon completion of all applicable procedures, including any appeal of the NYSE Regulation staff’s decision,” the NYSE said in a statement.
In November, President Trump issued an executive order (13959) that banned American investments funding Chinese companies that the Pentagon deem as having ties with the People’s Liberation Army. The Pentagon has identified 35 such companies this year including the three delisted Chinese telecom companies. In December, the Trump administration strengthened the executive order by banning investments into any subsidiary of a Communist Chinese Military Company (CCMC).
Other American exchanges have also announced the delisting of Chinese firms. On Dec.21, NASDAQ removed China Communications Construction Co, China Railway Construction Corp, Semiconductor Manufacturing International Corp, and CRRC Corp from its exchange. MSCI announced removing 10 Chinese firms from some of the indexes, including SMIC, Hangzhou Hikvision, and China Communications Construction Co. These companies will be cut off from the indexes on Jan 5. S&P Dow Jones Index removed American Depositary Receipts (ADRs) of 10 Chinese companies, Hong Kong-listed H-shares, and mainland-listed A-shares on Dec. 21. On the same date, FTSE removed eight Chinese companies.
China has lashed out at the expulsion of its companies from stock exchanges, with foreign ministry spokesperson Wang Wenbin calling the act an “unjustified crack-down.” He accused the Trump administration of abusing the idea of national security to suppress foreign nations. However, many security experts agree with President Trump. Roger Robinson, a former national security official, wants even more Chinese companies to be included in the Pentagon’s List, specifically those blacklisted by the U.S. government but still continuing to have access to U.S. capital. Christopher Iacovella, CEO of the American Securities Association, wants all companies controlled by the CCP to be expelled from the American capital market.
Senator Marco Rubio welcomed the Trump administration’s decision. “I was proud to work with the Trump Administration on their Executive Order to prohibit investment in Chinese military firms, and MSCI’s decision to remove these dangerous companies from their indexes is a result of that good work… If any future Administration were to reverse course, it would be a clear signal that they are putting the interests of the Chinese Communist Party and Wall Street above the interests of American workers and mom and pop investors,” he said in a statement.
With the U.S. banning Chinese companies from getting funded with American money, the CCP is apparently trying to raise funds from its own citizens. On Dec. 22, the China Securities Regulatory Commission (CSRC) convened a meeting in which they stressed the need to have public funds channeled into the country’s capital markets. Experts believe this initiative is underhanded. Li Hengqing, director of the Washington D.C.-based Informatics & Strategies Institute, points out that the communist regime is merely trying to shift financial risks onto the shoulders of the common Chinese citizen by forcing them to invest their savings into companies. If the businesses go bust, the people lose money, while the CCP gets off scot-free.
By Prakash Gogoi