Five state-owned Chinese companies to be delisted from the New York Stock Exchange

In separate statements released Friday, China Life Insurance, PetroChina, Sinopec, Aluminum Corporation of China and Sinopec Shanghai Petrochemical said they had notified the NYSE and filed for “voluntary delisting.”

All five companies cited “low US turnover” and “high administrative burden and costs” as reasons for leaving.

However, the news comes after the US Securities and Exchange Commission noted in May that all five companies did not meet US auditing standards.

The China Securities Regulatory Commission, which oversees China Securities, said on Friday that it is aware of the situation and that “it is normal for companies to list or delist in any market.”

“We will liaise with foreign regulators and work together to protect the rights of corporations and investors,” the statement said.

Increasing attention

The news comes after the Securities and Exchange Commission stepped up its scrutiny of Chinese companies.

The Commission may kick out companies the stock exchange if they do not allow US regulators to review their financial audits for three consecutive years. China has for years refused to have its US firms audited.

Chinese companies that are traded overseas must keep their audit documents in mainland China, where they cannot be verified by foreign agencies.

But in April, China’s Securities Supervisory Authority proposed changing a decade-old rule that banned Chinese firms from sharing sensitive data and financial information with foreign regulators. Amendment could allow US regulators to review the audit reports of Chinese companies listed in New York.

However, companies like Alibaba are taking steps to prepare for the potential loss of direct access to the US capital market.

At the end of July, the Securities and Exchange Commission added Alibaba is on a list of more than 150 companies that could face delisting if their audits are not reviewed within the next three years, joining China’s biggest companies such as JD.com and Baidu.

Even before the commission added Alibaba to its watchlist, the company announced that it would seek an initial listing on the Hong Kong Stock Exchange.

Alibaba currently has a secondary listing on the Hong Kong Stock Exchange.

“Hong Kong’s primary listing status gives Chinese ADRs (American Depository Shares) the opportunity to diversify listing risk and retain access to the public stock market” if they are forced to leave the United States, Goldman Sachs analysts said in recent report.

If the transition goes smoothly for Alibaba, it could “open the way” for many more Chinese ADRs, Citi analysts said.

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