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Beware unintended consequences. US-listed Chinese companies, including giants Alibaba and Temu owner PDD, have been hit by fears they may be forced to delist from New York. Such a move would be painful for US investors and play into Beijing’s hands.
Earlier this month, Treasury secretary Scott Bessent, when asked directly, refused to rule out the forced delisting of Chinese companies amid the US-China trade war. President Donald Trump has form here, having in 2020 kicked several state-backed Chinese companies off the New York Stock Exchange through a chaotic series of orders, countermands and clarifications.
Hong Kong, the most likely home for New York refugees, is rolling out the red carpet in anticipation. Shares in its local exchange enjoyed their best day in months after officials said several groups had already made contact.
At stake are 286 US-listed Chinese companies worth $1.1tn as of March, according to a Washington-appointed committee monitoring dealings between the two countries.
The impact of a forced delisting would be more muted than such numbers imply. Half of the Chinese groups listed in the US are worth less than $50mn apiece. They tend to attract little attention other than for puzzling share price leaps and crashes. New York investors would hardly miss such small fry.
Behemoths such as Alibaba, PDD and video games producer NetEase are a different story, of course. US investors hold about 30 per cent of the biggest groups, estimates Goldman Sachs. But since the delisting threat first emerged in 2020, almost all the biggest companies — with the notable exception of PDD — have arranged dual Hong Kong listings, and the majority of US investors can trade there. About 35 per cent of Alibaba’s daily trading is now handled in the Chinese territory, a proportion that has grown over time.
Forced delistings would still be a bruising experience for US investors. About 7 per cent of the biggest Chinese groups’ market capitalisations would be at risk of being dumped by investors who cannot trade overseas, reckons Goldman. Their need to sell would depress valuations for a while.
More broadly, the ejection of Alibaba and its ilk from the Big Apple would suit Beijing’s love of control. It has never sat easily with Communist party bosses that foreigners, rather than compatriots, got the upside from homegrown success stories, nor that those groups must follow foreign regulations. What better than to have them removed from the US orbit and bolster Hong Kong’s standing in the process?