In a White House memorandum issued on Thursday, President Trump set a 60-day deadline for financial regulators to develop ideas on how to crack down on Chinese companies listed in the U.S. that fail to abide by proper accounting standards. The move comes amid heightened tensions between the U.S. and China following the Wuhan coronavirus pandemic and Beijing's national security law imposed on Hong Kong.
China has long reaped the benefits of American financial markets and capital raised in the United States, but Beijing has shielded companies with significant operations in China from investor protections applicable to all companies publicly traded on U.S. exchanges. The president gave several examples, including China's obstruction of the Public Company Accounting Oversight Board (PCAOB) whose statutory obligation is to enforce audit standards and inspect audit work.
"Investors trust the financial information provided by United States public companies and know that fraudulent activities will promptly be addressed by United States financial regulators. As a result, companies from around the world want to list on United States stock exchanges and raise money in the United States. Chinese companies are no exception," the president wrote.
"It is both wrong and dangerous for China to benefit from our capital markets without complying with critical protections that investors in those markets rightfully expect and deserve," the president continued.
The memorandum instructs the President's Working Group on Financial Markets (PWG) to recommend actions the administration can undertake to develop enforcement mechanisms and other guidelines to protect investors. The president said the recommendations "should take into account the impact on investors and ensure the continued fair and orderly operation of United States financial markets."
The PWG includes U.S. Treasury Secretary Steven Mnuchin, Federal Reserve Chairman Jerome Powell, Securities and Exchange Commission Chairman Jay Clayton and Commodity Futures Trading Commission Chairman Heath Tarbet.
The president's memorandum can be read here.
