US-Listed Chinese Firms Must Disclose Gov Interference Risks

Chinese companies listed on US stock exchanges must disclose the risks of the Chinese government interfering in their businesses as part of their regular reporting obligations, a top US Securities and Exchange Commission (SEC) official said on Monday, July 26.

Democratic commissioner Allison Lee’s comments are the first by an SEC official since Chinese regulators launched a massive cyber probe of ride-hailing giant Didi Global last week, just days after its US$4.4 billion New York listing, wiping 25% off its share price. 

US authorities have cracked down on other US-listed Chinese companies and may require tutoring firms to become non-profits, according to a Bloomberg report that hit shares in the sector, including New York-listed TAL Education and Gaotu Techedu.

Some policymakers worry Chinese firms are systematically flouting US rules, which require public companies to disclose to investors a range of potential risks to their businesses.

“Public companies must disclose significant risks which, for China-based issuers, may sometimes involve risks related to the regulatory environment and potential actions by the Chinese government,” Lee, who served as acting head of the SEC from late January to mid-April, told Reuters in an interview.

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