Chinese state-media says that more Chinese companies could pursue IPO’s on bourses outside the United States if the Trump administration decides to push ahead with a requirement that they abide by US accounting standards.
In an interview with the Fox Business Network last Thursday US President Donald Trump said that he was “very strongly” considering the imposition of US accounting rules in the form of Generally Accepted Accounting Principles (GAAP) upon Chinese companies planning to list on American bourses.
The US Securities and Exchange Commission (SEC) currently requires that US companies abide by GAAP when listing on US exchanges, yet allows foreign companies to employ international accounting rules.
While some Chinese companies listed in America do follow GAAP, such as Alibaba, state-owned enterprises are more inclined abide by international accounting rules.
A report from state-owned newspaper Global Times cited local analysts as saying that the move could jeopardise IPO’s by Chinese companies on US bourses.
“It’s an obvious threat that points a gun at Chinese companies,” said Dong Dengxin, director of the Finance and Securities Institute at the Wuhan University of Science and Technology, to Global Times.
“Trump wants to shut China’s access to the US capital market. But chances the rule will be revised are very slim. If the SEC revises how it treats Chinese firms, rules for other foreign companies also need to be modified accordingly.”
Sources recently said to Reuters that Nasdaq has prepared new rules to impose a minimum IPO fund-raising amount of USD$25 million, in order to curb the number of smaller Chinese companies pursuing listings on the exchange.