Delist The Dragon? GOP States Want SEC To Boot Out Chinese Stocks Over Audit, Fraud Risks

State financial officers from 21 Republican-led states called for an SEC examination into whether Chinese companies listed in the U.S. should face delisting for their lack of investor protection in America.

In their letter addressed to SEC Chair Paul Atkins, the state officials highlighted that Chinese regulations generate financial opacity and fraud risk through audit limitations and the implementation of VIE structures, which bypass U.S. regulatory controls, according to a report by Financial Times.

The officers confirmed that the SEC has the power to remove companies from listings when these entities fail to follow U.S. securities regulations or their auditors cannot undergo proper inspection by the Public Company Accounting Oversight Board (PCAOB).

The letter builds upon previous demands from senior Republican legislators who have requested measures against Chinese companies connected to military activities.

The SEC announced its ongoing review process for these concerns and declared its intent to exercise its authority when necessary.

The PCAOB conducts inspections in China based on a 2022 agreement, but its future is uncertain due to legislative moves that may reorganize the agency.

Recently, U.S. Treasury Secretary Scott Bessent told Fox News that potential measures against Chinese companies may involve all options, including removing them from U.S. stock exchanges. 

His remarks followed China's decision to impose an 84% tariff on U.S. goods in response to the existing 145% U.S. tariffs during escalating trade disputes.

Torchbearer Alibaba's U.S.-listed shares and the broader KraneShares CSI China Internet ETF (KWEB), which tracks Chinese tech companies, are up about 47% and 20% this year, respectively.

For updates and corrections, email newsroom[at]stocktwits[dot]com.