U.S. officials warned colleges and universities in the nation of the «high risks» associated with Chinese companies listed in the country and warned of the possibility «wholesale de-listing».
«Boards of U.S. university endowments would be prudent to divest from People’s Republic of China firms’ stocks in the likely outcome that enhanced listing standards lead to a wholesale de-listing of PRC firms from U.S. exchanges by the end of next year,» according to a «Bloomberg» report citing Keith Krach, undersecretary for economic growth, energy and the environment.
«Holding these stocks also runs the high risks associated with PRC companies having to restate financials,» he said in a letter to the board of directors of American universities and colleges.
«Clean» Investments
The comment coincides with the increasing number of financial scandals involving Chinese companies listed in the U.S. including the most recent probe of iQIYI, sometimes dubbed «China’s Netflix», over accusations of falsely inflating sales and user base figures. Interestingly, Krach not only pointed out financial risk but even alluded to responsible investing.
«These boards have a moral responsibility, and perhaps a fiduciary duty, to really look into this, to make sure their investments are clean,» said Krach, who is also a former chairman of the Purdue University Board of Trustees.
U.S. authorities have been applying increasing pressure on listed Chinese companies in recent times including a unanimous call for tighter listing standards by the «President’s Working Group on Financial Markets» made up of heavyweights like Fed chair Jerome Powell, SEC chairman Jay Clayton; and Heath Tarbert, chairman of the Commodity Futures Trading Commission.
