"While China reaps advantages from US markets, the Chinese government has consistently prevented Chinese companies and companies with significant operations in China from abiding by the investor protections that apply to all companies listing on US stock exchanges," Trump alleged.
"China's actions to thwart our transparency laws raise significant risks for investors. The time has come to take firm action in an orderly fashion to put an end to the practice that has tacitly permitted companies with significant Chinese operations to flout protections United States
law requires for investors in United States
markets," Trump said.
Meanwhile, Mike Pompeo
plans to warn American investors against 'fraudulent' accounting practices of China-based companies and suggest the Nasdaq's recent decision to tighten listing rules for such players should be a model for all other exchanges around the world.
Many US-listed Chinese firms will likely list on the Hong Kong exchange this year in part because of US political pressure, the head of that exchange said Thursday. Nasdaq
Inc took action last month and tightened listing rules, in a bid to curb initial public offerings of Chinese companies closely held by insiders and with opaque accounting.
Recently, the Chinese government enacted a statute that expressly prevents audit firms from providing transparency without the prior consent of Chinese financial regulators, he said.
Preventing the Public Company Accounting Oversight Board (PCAOB) from complying with its statutory mandate means that investors cannot have confidence in the financial reports of audited companies and this creates significant risks to investors in the securities listed on US stock exchanges, Trump said.
The Securities and Exchange Commission (SEC) and the PCAOB have pressed China for years to allow companies to provide greater transparency in financial information, to no avail, he rued.
Concerns about China's efforts to thwart transparency requirements suggest significant risks even for investors in Chinese companies listed on US stock exchanges, the president said.
"Such companies may not provide appropriate and safe investments for investors, including pension funds, which owe fiduciary duties to their beneficiaries. For these reasons, we must take firm, orderly action to end the Chinese practice of flouting American transparency requirements without negatively affecting American investors and financial markets. We must ensure that laws providing protections for investors in American financial markets are fully enforced for companies listed on United States
stock exchanges," Trump said.
In his memorandum, Trump asked the treasury secretary to convene the President's Working Group on Financial Markets.
The group will discuss the risks to investors and financial markets posed by the Chinese government's alleged failure to uphold its international
commitments to transparency and accountability and its refusal to permit companies to comply with US law, according to the memorandum.
The group has been asked to submit its memorandum in the next 60 days.