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Rubio, Braun Introduce Legislation Banning Malign Chinese Companies From Exploiting U.S. Capital Markets

Oct 27, 2020 | Press Releases

Washington, D.C. — U.S. Senators Marco Rubio (R-FL) and Mike Braun (R-IN) introduced the American Financial Markets Integrity and Security Act, legislation that would prohibit malign Chinese companies — including the parent, subsidiary, affiliate, or a controlling entity — that are listed on the U.S. Department of Commerce Entity List or the U.S. Department of Defense list of Communist Chinese military companies from accessing U.S. capital markets. A one-pager of the legislation is available here.
 
Currently, there are a number of Chinese companies, including over thirty that were identified on lists released in June and August 2020 by the Pentagon, as well as networks of affiliated and subsidiary companies. This includes those companies that have been sanctioned by the U.S. government that are operating in the U.S. capital market system and are involved in the Communist Party’s military, espionage, human rights abuses, “Military-Civil Fusion Strategy,” and the Made in China 2025’ industrial policy.
 
“The Chinese Communist Party’s exploitation of U.S. capital markets is a clear and ongoing risk to U.S. economic and national security that must be addressed,” Rubio said. “Currently, there are a number of Chinese companies operating in U.S. capital markets that are actively engaged in the Communist Party’s military, espionage, human rights abuses, ‘Military-Civil Fusion Strategy,’ and the Made in China 2025’ industrial policy. The American Financial Markets Integrity and Security Act will ban these companies from operating in U.S. capital markets and make clear to the Communist Party that they will no longer be able to exploit our financial system.”
 
“China doesn’t play by the same rules as American companies and, what’s worse, some of these Chinese companies are using slave labor through religious persecution to get ahead,” Braun said. ”These bad actors should have no role in the American marketplace — that’s why I’m proud to be a cosponsor of Senator Rubio’s legislation that works to end this egregious bad business behavior.”
 
Last year, Rubio introduced the Ensuring Quality Information and Transparency for Abroad-Based Listings on our Exchanges (EQUITABLE) Act, bipartisan, bicameral legislation to ban Chinese and foreign firms that flout U.S. laws from U.S. exchanges. Rubio previewed the legislation in an op-ed in The Wall Street Journal. A one-pager of the legislation is available here. Key Rubio provisions were included in Senator John Kennedy’s (R-LA) Holding Foreign Companies Accountable Act (S.945), which passed the Senate on May 20, 2020.
 
Background:

  • In February 2020, the Securities and Exchange Commission (SEC) released a statement regarding the difficulties U.S. regulators face when auditing U.S.-listed companies based in China, and how over the past decade, U.S. investors, and the U.S. capital markets more generally, have become more exposed to companies with significant operations in emerging markets, including China, the largest emerging market economy.
  • In December 2018, the SEC and the Public Company Accounting Oversight Board (PCAOB) issued a joint warning to investors about the challenges American regulators face when attempting to conduct oversight of U.S.-listed companies whose operations are based in China and Hong Kong.
  • While the PCAOB regularly inspects audits of U.S.-listed firms at home and abroad, Beijing consistently and systemically challenges those efforts. For example, Chinese law requires that records remain in China, and the Communist Party routinely restricts access to typical accounting information on the grounds of national security and state secrecy.
  • The U.S.-China Economic and Security Review Commission identified 156 Chinese companies, including 11 state-owned-enterprises, that are listed on America’s three largest exchanges with a combined market capitalization of $1.2 trillion.
  • In March 2018, the influential global index provider MSCI announced that it would quadruple its weighting of Chinese company shares in one of its key index products.