U.S. Lawmakers Urge SEC to Delist Chinese Companies Linked to Military
In a significant move highlighting U.S.-China tensions, two Congressional leaders have formally requested that the Securities and Exchange Commission (SEC) take action to delist a number of Chinese companies, asserting that these entities pose a threat to American national security.
Focus on National Security
Representatives John Moolenaar and Rick Scott, chairpersons of the House China Committee and Senate Committee on Aging respectively, sent a letter to SEC Chair Paul Atkins. They identified 25 Chinese firms, including major players like Alibaba, Baidu, JD.com, and Weibo, asserting that their operations are aligned with the strategic objectives of the Chinese Communist Party (CCP).
Concerns Over Military Ties
The lawmakers expressed serious concerns that these companies facilitate military modernization in China while simultaneously contributing to severe human rights violations. They emphasized that many of these corporations, despite their commercial appearances, are integrated into China’s military and surveillance networks, supported by China’s military-civil fusion program.
Legislative Context
The appeal to the SEC is part of a broader U.S. initiative aimed at countering the growing influence of China in critical sectors. This comes in the wake of escalating trade tensions between the two nations, with both sides grappling over various economic and strategic issues. The letter cited the need for enhanced scrutiny due to concerns that American capital, technology, and expertise are being exploited to strengthen China’s military capabilities.
Legal Framework and Implications
Moolenaar and Scott highlighted that the SEC possesses the necessary authority under the Holding Foreign Companies Accountable Act to delist securities of foreign firms that fail to safeguard American investors adequately. They strongly urged the SEC to act, citing the potential risks for U.S. investors involved with these companies.
Specific Companies Targeted
The letter specifically mentioned several companies, including:
- Pony AI – Known for developing autonomous driving technology.
- Hesai – A laser sensors manufacturer placed on a U.S. defense blacklist.
- Tencent Music – Owned by Tencent Holdings and already flagged by the Pentagon.
- Daqo New Energy Corp – Under scrutiny for allegations of forced labor in Xinjiang.
Investor Concerns
With 286 Chinese companies listed on U.S. exchanges as of March, the potential implications of these actions on investment strategies are becoming increasingly pertinent. Roger Robinson, a former chair of the U.S.-China Economic and Security Review Commission, remarked on the shifting landscape, emphasizing that the financial support from U.S. investors might be winding down in response to ongoing trade disputes.
Next Steps for the SEC
Newly appointed SEC Chair Paul Atkins has not yet outlined specific measures concerning Chinese firms. Nonetheless, heightened scrutiny of these entities may suggest a turning point in U.S. regulatory policy aimed at safeguarding national interests. During his confirmation hearing, Atkins acknowledged the importance of rigorous accounting and auditing in maintaining investor protection.
Chinese Response
In reaction to these developments, representatives from the Chinese embassy in Washington criticized the U.S. approach, asserting that it amounts to an overreach of national security concepts and equating economic issues with political tools.
The ongoing scrutiny of Chinese companies in the U.S. underscores a complicated interplay between economic activities and national security, revealing the high stakes involved in the U.S.-China relationship.
