SHANGHAI: Five Chinese state-owned companies, including oil giant Sinopec and China Life Insurance, said on Friday they would delist from the New York Stock Exchange, amid economic and diplomatic tensions with the United States.

The companies, which also include Aluminium Corporation of China (Chalco), PetroChina and Sinopec Shanghai Petrochemical Co, each said that they would apply to delist their American Depository Shares this month.

The five, which in May were flagged by the US securities regulator as failing to meet its auditing standards, will keep their listings in Hong Kong and mainland Chinese markets.

Beijing and Washington are in talks to resolve a long-running audit dispute that could see Chinese companies banned from US exchanges if they do not comply with US rules.

Washington has long demanded complete access to the books of US-listed Chinese companies, but Beijing bars foreign inspection of audit documents from local accounting firms, citing national security concerns.

There was no mention of the auditing dispute in separate statements by the Chinese companies outlining their moves, which come amid heightened tensions after last week’s visit to Taiwan by US House of Representatives Speaker Nancy Pelosi.

“These companies have strictly complied with the rules and regulatory requirements of the US capital market since their listing in the US and made the delisting choice for their own business considerations,” the China Securities Regulatory Commission (CSRC) said in a statement.

The agency added that it would keep “communication open with relevant overseas regulatory agencies”.

The oversight row, which has been simmering for more than a decade, came to a head in December when the US securities regulator finalised rules to potentially prohibit trading in Chinese companies under the Holding Foreign Companies Accountable Act. It said 273 companies were at risk.

Some of China’s largest companies, including Alibaba Group Holdings, J.D Com Inc and Baidu Inc, are among them. Alibaba said last week it would convert its Hong Kong secondary listing into a dual primary listing.

Analysts said this could ease the way for the Chinese ecommerce giant to switch primary listing venues in the future.

In pre-market trading on Friday, US-listed shares of China Life Insurance and oil giant Sinopec fell 5.7 percent about 4.3 percent respectively.

Patience wearing thin

Market-watchers were split over what the delistings might mean for the audit deal, with some saying it was a bad sign.

“China is sending a message that its patience is wearing thin in the audit talks,” said Kai Zhan, senior counsel at Chinese law firm Yuanda, who specialises in US capital markets.

The companies said their US traded share volume was small compared with those on their other major listing venues.

PetroChina said it had never raised follow-on capital from its USlisting and its Hong Kong and Shanghai bases “can satisfy the company’s fundraising requirements” as well as providing “better protection of the interests of the investors”.

Global fund managers holding US-listed Chinese stocks are steadily shifting towards their Hong Kong-traded peers, even as they remain hopeful the audit dispute will eventually be resolved.

Published in Dawn, August 13th, 2022

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