US lawmakers urge SEC to delist Chinese companies: report

The chairs of two congressional committees have urged the Securities and Exchange Commission to delist e-commerce giant Alibaba Group Holding (NYSE:BABA) and other Chinese companies that they allege have ties to China’s military, the Financial Times reported late Friday.

The chair of the House China committee, John Moolenaar (R-Mich.), and the chair of the Senate committee on aging, Rick Scott (R-Fla.), wrote a letter to SEC Chair Paul Adkins to ask the regulator move against 25 Chinese companies listed on U.S. stock exchanges, the FT reported, citing the letter that it obtained.

The lawmakers are also targeting search engine Baidu (NASDAQ:BIDU), online retailer JD.com (JD), and social-media platform Weibo (WB), the FT said.

“These entities benefit from American investor capital while advancing the strategic objectives of the Chinese Communist party . . . supporting military modernisation and gross human rights violations,” the lawmakers were quoted as saying in the letter. “They also pose an unacceptable risk to American investors.”

The lawmakers reportedly alleged that regardless of how commercial the companies seemed to be, they are “ultimately harnessed for nefarious state purposes,” because Chinese companies are required to share technology with the Chinese army when Beijing orders it.

According to Moolenaar and Scott, the extent of the Chinese Communist Party’s control over local companies are “systemically concealed from US investors” and that Chinese law causes “unpredictable risk to US investors that enhanced disclosures cannot mitigate,” the FT reported.

They were quoted as saying that the companies listed in their letter are “not merely opaque” and are “actively integrated into the Chinese military and surveillance apparatus.”

The SEC has the authority under the Holding Foreign Companies Accountable Act to “suspend trading and compel delisting by suspending or revoking the registration of the securities of Chinese companies that do not adequately protect American investors,” the lawmakers were quoted as saying.“The SEC can – and must – act,” they reportedly said.

Other targets in the letter included autonomous driving technology provider Pony AI (PONY), and laser sensor maker Hesai (HSAI), which the Department of Defense has put on a list of companies with alleged ties to the Chinese military, the FT reported.

The report added that streaming music platform Tencent Music (TME), which is owned by Tencent Holdings (OTCPK:TCEHY)(OTCPK:TCTZF), was listed in the letter. Tencent Holdings has been placed on the blacklist by the Pentagon, the FT said.

Polysilicon producer Daqo New Energy Corp. (DQ) was also named in the letter, and the company has been on a US Commerce Department blacklist for allegedly using forced labor, the FT said.

The lawmakers’ offices, SEC, Chinese embassy, Alibaba, Baidu, JD.com, Weibo, Pony AI, Hesai, Tencent Music, and Daqo New Energy Corp. did not immediately respond to requests for comment by Seeking Alpha.