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Five Chinese state-owned companies are delisted from the New York Stock Exchange

Five Chinese state-owned companies are delisted from the New York Stock Exchange
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In separate statements released on Friday, China Life Insurance, PetroChina, Sinopec, Aluminum Corporation of China and Sinopec Shanghai Petrochemical said they had notified the NYSE and requested a “voluntary delisting.”

All five companies cited “low sales in the USA” and “high administrative workload and costs” as reasons for leaving.

But the news comes after all five were flagged by the US Securities and Exchange Commission in May for failing to comply with US auditing standards, according to Reuters.

China’s securities regulator, the China Securities Regulatory Commission, said on Friday that it is aware of the situation and that “it is normal for companies to be listed or delisted on any market.”

“We will remain in contact with foreign supervisory authorities and together we will protect the rights of companies and investors,” it said.

Increasing control

The news comes as the Securities and Exchange Commission is stepping up its scrutiny of Chinese company audits.

The commission can divest companies the exchange if they don’t provide U.S. regulators with insight into their financial audits for three consecutive years. China has for years rejected US audits of his companies.

Chinese companies trading overseas must keep their audit records in mainland China, where they cannot be audited by foreign authorities.

But in April, China’s securities regulators proposed changing a decades-old rule that bans Chinese firms from sharing sensitive data and financial information with foreign regulators. The change could allow US regulators to see audit reports of Chinese companies listed in New York.

Still, companies like Alibaba are taking steps to prepare for a potential loss of direct access to US capital markets.

In late July, the Securities and Exchange Commission added Alibaba has been added to a list of more than 150 companies that could face evictions if their audits cannot be reviewed in the next three years, joining some of China’s biggest companies like JD.com and Baidu.

Even before the Commission placed Alibaba on its watch list, the company announced that it would seek an initial listing on the Hong Kong Stock Exchange.

Currently, Alibaba has a secondary listing on the Hong Kong Stock Exchange.

“A primary listing status in Hong Kong gives Chinese ADRs (American Depository Shares) the opportunity to diversify their listing risk and retain access to the public stock market” if forced to leave the United States, Goldman Sachs analysts said a recent report.

If the transition goes smoothly for Alibaba, it could “set the stage” for many more Chinese ADRs to pursue a similar switch, Citi analysts said.

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