US lawmakers urge SEC to delist Alibaba and Chinese companies

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The heads of two Congressional panels have urged the Securities and Exchange Commission to delist Chinese groups, including Alibaba, that they say have military links that put US national security at risk.

John Moolenaar, the Republican chair of the House China committee, and Rick Scott, the Republican chair of the Senate committee on ageing, wrote to SEC chair Paul Atkins on Friday to ask his agency to take action against 25 Chinese groups listed on American exchanges.

The targets also include search engine Baidu, online retail platform JD.com and the popular social media platform Weibo.

“These entities benefit from American investor capital while advancing the strategic objectives of the Chinese Communist party . . . supporting military modernisation and gross human rights violations,” the lawmakers said in the letter, which was obtained by the Financial Times. “They also pose an unacceptable risk to American investors.”

Moolenaar and Scott said no matter how commercial the Chinese groups appeared on the surface, they were “ultimately harnessed for nefarious state purposes”, partly because of China’s military-civil fusion programme which requires Chinese companies to share technology with the People’s Liberation Army when so ordered by Beijing.

The push marks the latest US effort to counter China and reduce its ability to use American capital, technology and expertise to modernise its military.

The two countries are also embroiled in a trade war that has exacerbated tensions between Washington and Beijing. The CIA on Thursday also released two Chinese-language videos designed to help them recruit more spies inside China.

Moolenaar and Scott said the extent of CCP control over Chinese companies was “systemically concealed from US investors” and Chinese law created “unpredictable risk to US investors that enhanced disclosures cannot mitigate”. They added many of the companies they cited in their letter were “not merely opaque” but were “actively integrated into the Chinese military and surveillance apparatus”.

They said the SEC had the tools and authority under the Holding Foreign Companies Accountable Act to “suspend trading and compel delisting by suspending or revoking the registration of the securities of Chinese companies that do not adequately protect American investors”.

“The SEC can — and must — act,” Moolenaar and Scott wrote.

The targets include Pony AI, which makes autonomous driving technology, and Hesai, a laser sensors group that the Pentagon has put on a list of groups with alleged military ties, which the company has denied.

They also include Tencent Music, a streaming platform owned by Tencent Holdings, which has already been placed on the Pentagon’s blacklist. Another group is Daqo New Energy Corp, a polysilicon producer that has previously been put on a US commerce department blacklist for allegedly engaging in forced labour in Xinjiang.

The lawmakers said the groups were just a subset of Chinese companies that were “accessing US capital while serving a genocidal dictatorship and our foremost geostrategic rival”.

There were 286 Chinese companies on US exchanges as of March, according to the US-China Economic and Security Review Commission, which was created by Congress to investigate the security implications of trade and economic relations between the US and China. 

The move comes as some investors in the US have become concerned that the US-China trade war could escalate into a capital war.

“This multitrillion-dollar US investor underwriting of our principal adversary over these many years will now gradually draw to a close, much like our willingness to continue tolerating China’s grossly unfair trade practices,” said Roger​ Robinson, former chair of the US-China Economic and Security Review Commission who now runs his own consultancy.

Atkins, who was sworn in as SEC chair last month, has yet to announce policy moves focused on China. His predecessor, Gary Gensler, heightened scrutiny of securities associated with Beijing.

Asked in his confirmation hearing about ensuring Chinese groups comply with US standards, Atkins said: “Accounting and auditing is really crucial obviously to investor protection and to the capital markets.”

In addition to pushing for action on Chinese companies in the US, the House China panel has upped scrutiny of American financial groups that work with, or invest in, Chinese companies that have alleged military ties or that face accusations of human rights abuses.

The FT has requested comment from each of the companies.

​The Chinese embassy in Washington said Beijing opposed the US “overstretching the concept of national security, using national apparatus and long-arm jurisdiction to bring down Chinese companies”. 

“We oppose turning trade and technological issues into political weapons,” said Liu Pengyu, the embassy spokesperson.

The SEC on Friday said Atkins will respond to members of Congress directly.