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Bill forcing Chinese firms to meet U.S. accounting standards passes Congress

People walk past the New York Stock Exchange in the Manhattan borough of New York, November 10, 2020.

Carlo Allegri | Reuters

The U.S. House of Representatives passed legislation on Wednesday that could prevent Chinese companies from listing their shares on U.S. exchanges unless they adhere to U.S. auditing standards.

The measure passed by unanimous voice vote, after passing the Senate earlier this year, sending it to the White House which said President Donald Trump is expected to sign it into law.

“The Holding Foreign Companies Accountable Act” bars securities of foreign companies from being listed on any U.S. exchange if they have failed to comply with the U.S. Public Accounting Oversight Board’s audits for three years in a row.

While it applies to companies from any country, the legislation targets Chinese companies such as Alibaba, tech firm Pinduoduo and oil giant PetroChina.

Measures taking a harder line on Chinese business and trade practices generally pass Congress with large margins, as both Democrats and Trump’s fellow Republicans echo the president’s hard-line against Beijing.

Democratic Senator Chris Van Hollen, who co-authored the bill with Republican Senator John Kennedy, said in a statement that American investors “have been cheated out of their money after investing in seemingly-legitimate Chinese companies that are not held to the same standards as other publicly listed companies.”

Kennedy said China was using U.S. exchanges to “exploit” Americans. “The House joined the Senate in rejecting a toxic status quo,” he said in a statement.

The act would also require public companies to disclose whether they are owned or controlled by a foreign government.

Greater scrutiny could also deter other Chinese firms from listing in the United States, say industry participants. Such listings reached a six-year high this year.

International disagreements

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