Why does the US want to delist Chinese companies from its stock exchanges?

Over 200 Chinese companies, with a combined market cap of over $2 trillion, are listed in the US. And American citizens, pension funds, mutual funds, etc, invest billions of dollars in them.

With this kind of money involved, these investors need to be protected. And PCAOB, a regulator, does just that by inspecting the audits of public companies to make sure there’s no funny business.

However, China has barred PCAOB from auditing companies like Alibaba, Baidu, etc

China believes letting a foreign regulator enforce its laws on homegrown companies violates its sovereignty. They also contend that the audit papers might contain state secrets.

But the problem is, many Chinese firms fudge their numbers and dupe investors. Remember Luckin Coffee? Investors lost 80% in a single day when the company admitted to fudging revenues. And this was just the tip of the iceberg.

The US obviously wants to protect its investors. So two days ago, the US House of Representatives passed a new bill (US Senate approved it in May) that allows them to delist Chinese (and other foreign) companies that don’t comply with the PCAOB for 3 years in a row.