Share prices of dual-listed Chinese companies are falling after U.S. regulators adopted measures that would remove foreign companies from American stock exchanges if they do not comply with American auditing standards.
The Securities and Exchange Commission (SEC) has unveiled the "Holding Foreign Companies Accountable Act" that is aimed at removing Chinese companies from U.S. exchanges if they fail to comply with American auditing standards for three consecutive years.
The rules also require firms to prove to the SEC that they are not owned or controlled by an entity of a foreign government and to name any board members who are Chinese Communist Party officials, the SEC said in a written statement.
In Hong Kong, the news prompted a sharp selloff of the U.S.-listed Chinese companies that have also listed on the city’s exchange. Baidu shares closed down 9.65%, Alibaba (NYSE:BABA) fell 3.9%, JD.Com (NASDAQ:JD) fell 3.57% and Netease (NASDAQ:NTSE) was down 2.25%.
The declines came as the broader Hong Kong Hang Seng Index dropped 0.07% and a 1.2% fall in the Hang Seng Technology Index. The technology index has fallen 11.3% so far in March.
China’s Foreign Ministry said in a statement that the SEC decision would hurt the reputation of U.S. capital markets.
