This op-ed by Sen. John Kennedy (R-La.) first appeared in the Greater Baton Rouge Business Report on Dec. 11, 2020.
Luckin Coffee, known as “China’s answer to Starbucks,” has a casual relationship with the truth. In April, the company was forced to disclose that its chief operating officer, Jian Liu, inflated its 2019 sales by $310 million. The revelation caused Luckin Coffee’s shares to fall by 80%, and its value to drop from $12.7 billion to less than $800 million.
How is it possible that a Chinese company publicly traded on a major U.S. exchange got away with this fraud for so long?
Luckin Coffee was finally delisted from the American NASDAQ stock exchange, but the damage was done. Americans who invested in the Chinese company had already suffered tremendous financial damage.
The problem is that Luckin Coffee is just one of almost 200 Chinese companies listed in America not subject to inspection by the federal Public Company Accounting Oversight Board (PCAOB). These companies claim that Chinese secrecy laws prevent them from sharing “sensitive” paperwork for auditing by the PCAOB.
This double standard means that Chinese companies can freely trade on U.S. stock exchanges without facing the same scrutiny and regulations as their competitors.
To combat this threat, Congress just unanimously passed a measure with two main provisions: First, the bill requires foreign companies to certify that they are not owned or controlled by a foreign government—like Communist China. The provision also requires companies to disclose any involvement by Chinese Communist Party (CCP) officials. Second, any foreign company that does not open its books for PCAOB auditing for three consecutive years will be banned from trading stocks on U.S. markets.
That’s key to how this bill, the Holding Foreign Companies Accountable (HFCA) Act, will protect investors at home. Many Louisianians and their fellow Americans rely on their stock portfolios for their retirement and education savings. It’s past time we safeguarded them from fraud by kicking bad actors off our markets.
Unfortunately, not everyone sees things this way. The Global Times, Communist China’s propaganda mouthpiece, called the bill a “loss-loss strategy.” Others warned that the HFCA Act has “all the nuance of a sledgehammer” and would “harm U.S. tech leadership.”
The common thread running through all this criticism is that the HFCA Act would work. It would drive out all companies that refuse to allow the PCAOB to review their audits. Why do Chinese firms currently get a pass? The legislation applies to all foreign companies—but currently it’s mostly Chinese companies that refuse to submit to the PCAOB’s jurisdiction, and American exchanges have tolerated that behavior.
Do we really want Chinese businesses to continue trading in our markets without being held to the same standards as other businesses? Congress says no.
The HFCA Act passed without a single “nay” vote because it will strengthen the credibility of U.S. stock markets, ensuring everyone plays by the same rules. As we recover from the economic challenges of a pandemic, the HFCA Act gives Louisiana investors peace of mind.
Everyone with an ounce of empathy can also see that arguments against holding Chinese companies accountable ignore the Chinese government’s abysmal human rights record. It’s only fair to expect companies to disclose any connections to the CCP, which is responsible for incarcerating 1 million Muslims in re-education camps, using forced labor on a massive scale, and attempting to stamp out Christianity. At present, Americans who want nothing to do with the CCP may be unwittingly funding it.
China’s deception has gone on for long enough. With bipartisan agreement already forged, the HFCA Act is now on the president’s desk, where he can sign it into law before more good people get hurt. Americans deserve accountability from foreign companies, and it’s finally within reach.