ACGA discusses outlook for U.S.-listed Chinese firms
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Jamie Allen from the Asian Corporate Governance Association believes that delisting U.S.-listed Chinese stocks could occur within the next two to 3 years.
“There doesn’t seem to be a huge incentive … for China to compromise, nor does the U.S. seem to want to compromise,” the secretary general at the non-profit organization told CNBC’s “Squawk Box AsiaOn Tuesday.
Allen stated that delisting U.S.-listed Chinese companies is likely to begin in the next few years, despite both parties appearing to be dragging their feet.
“There are discussions currently between the two parties, but they have been going round in circles for quite some time,” he stated. We believe that delisting will occur within two to three years unless there are changes in the geopolitical relations between the two countries.
Beijing is open to VIE structures
To list on the American market, many Chinese businesses have utilized the variable interest entity structure (VIE). The listing is made through a shell corporation, which often is based in Cayman Islands. Investors in U.S.-listed shares are not allowed to have majority voting rights.
Allen indicated that, for the moment, China appears to be “willing and able” to continue with VIE structures despite them being in an “extremely gray area” which is not technically compliant with China’s foreign ownership policy of sensitive sector.
Chinese regulators issued new guidelines for overseas listing in December. no ban being placed on the popular VIE structure.
He said that it was a convenient method for China to permit private companies to list abroad without having to change the type of Chinese ownership restrictions on technology firms or value-added services.
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