01

The ruthless tactics that have been brewing in the United States for a long time have finally come.

In the past two days, US Treasury Secretary Mnuchin has officially declared his position.Companies from China and other countries that do not comply with accounting standards will be delisted from the American Stock Exchange by the end of 2021.

The timetable is clear. There are still 16 months left.

At present, a total of 312 Chinese companies are listed in the United States.It involves various industries, not only national companies like BABA, but also large state-owned enterprises such as China Mobile Limited and China Telecom Corporation, including trendy companies like Bilibili Inc. and controversial companies with a black history like RYB Education Inc....

In short, the coverage is very large, there are companies in various industries, especially the Internet companies we are familiar with, the proportion of listing in the United States is very high.

Objectively speaking, over the past 20 years or so, the American Stock Exchange has helped many young Chinese companies a lot. Early companies such as NetEase, Inc and Sohu.com Ltd have developed a set of entrepreneurial models through listing in the United States:First, take money from various funds, and then do business, and finally get huge returns through listing. Funds can help LP make money, and startups can grow rapidly.

Because the listing requirements of A-shares are relatively strict, and the vast majority of start-ups do not meet the requirements, they basically set their listing destination in the United States.Chinese stocks have been the beneficiaries of deep globalisation over the past two decades.

So what is the impact of the current restriction move in the United States?

02

What Mnuchin said was"to comply with accounting standards."

Don't many people think it is the difference in accounting methods? Just adjust it.

In fact, this is not the case at all, this is really not a technical problem of how to do accounting.

This round of restrictions on US-listed stocks appears to be an after-effect of Ruixing's previous fraud.As the Americans say, "this is not an anti-China clause, but an investor protection clause."

Of course, we have to listen to what people say, who told us to cheat one after another. Brother Cat said in the article "humiliating rout" (poke link read) that those who are interested can read it.

But basically, this is still a continuation of the strategy of containing China.Trump has worked so hard for so long that he will not give up easily.

The core of what they call accounting standards isPay attention to audit papers and cross-border inspections.

What does "audit manuscript" mean?

Everyone knows that there has been a huge fraud scandal in the United States-the Enron incident. After that, US regulators began to mendAllow PCAOB to obtain audit manuscripts directly from accounting firms for investigation.

What does this PCAOB do?

It is an accounting self-discipline organization, composed of accountants from different member firms, is an independent regulatory body, PCAOB has the right to visit the account book at any time, what data you want less nonsense, immediately provide.

So in the supervision of US stocks,SEC is mainly responsible for the investigation of specific fraud cases, while PCAOB pays more attention to daily audit supervision.It is much more difficult to counterfeit.

These two organizations are unavoidable for listed companies in the United States, and US regulations stipulate that the accounting institutions employed by listed companies must be members of PCAOB, otherwise they cannot do this business.

Therefore, generally accounting firms with US business will sign contracts, but at present, audit manuscripts of US stock listed companies in two countries are not sent directly to PCAOB for review.Belgium and China (including mainland and Hong Kong).

Is there a problem here?

03

Most of the Chinese stocks are hired by the big four accounting firms, and they are naturally members of PCAOB, but when it comes to checking the books directly, that's another matter.

Because it involves another issue.Cross-border supervision.

At the end of last year, we just amended the securities law--

Overseas regulatory agencies shall not directly carry out activities such as investigation and collection of evidence within the territory of China, and no unit or individual may provide overseas documents and materials related to securities business activities without the consent of the CSRC and the relevant departments of China.

This law is reasonable and there is no problem with it.

However, Americans have been very unhappy, when PCAOB suspected that Chinese companies had made fraud, because they could not check the manuscript, a lot of evidence could not be confirmed, the investigation was very difficult, and the punishment could not be enforced, which was very depressing.

They have used a lot of methods, such as prosecution, business injunction and so on, in the hope that PCAOB will have the power to audit and inspect its member units registered in China and exercise cross-border procuratorial power.

For so many years, the problem of cross-border inspection has been raised as soon as the problem of counterfeiting is encountered.

Finally, in 2013, the Securities Regulatory Commission, the Ministry of Finance and PCAOB signed a memorandum of law enforcement cooperation to formally carry out cross-border audit law enforcement cooperation. That's for sure,This cooperation should be carried out through domestic regulators.

So this is an old problem, when the relationship is good, it is not a problem, there are many ways to solve it, but now the relationship is delicate, the United States has sacrificed this magic weapon, which requires us to deal with it well.

The CSRC also responded to this--China has never prohibited or prevented clubhouses from providing audit working papers to overseas regulators.

As a matter of fact, a lot of the work of the CSRC in recent years has been promoted around this issue, and there is more to be done next.

04

For 312 Chinese-listed companies, it is a difficult problem of the century.

Some companies have long made plans, such as NetEase, Inc and JD.com, to be listed on the Hong Kong Stock Exchange early. 21Vianet Group Inc, GDS Holdings Limited, and Yum China are also going to Hong Kong stocks. Similar news has also been reported by companies such as New Oriental Education & Technology Group, Trip.com, Sogou, Sina and so on.

Next, it is believed that more and more companies will make similar choices, because rational people will not bet their future on the unpredictable outside.

The next 16 months will be a period of policy games, and these companies also need to make choices. I hope there will be a good result, but it is not optimistic. Why do you say so?

1. This method of the United States has touched some of our bottom lines that we cannot make concessions, and it is difficult to satisfy.

2. Trump hasn't been thinking about this for a day or two.His goal is not to suppress the market capitalization of several companies, but to use various means to contain China.So it is probably very difficult to give in.

Is there a reason to say that? Let's take a look at the history of the rise of Chinese stocks.

As mentioned earlier, since 2000, companies such as Sohu.com Ltd, Sina, NetEase, Inc, Trip.com and Baidu, Inc. have successively landed in US stocks, and then US VCs immediately saw this big market, such as Sequoia, IDG and other top US investment institutions have come to China.2005 became the first year of US dollar venture capital in China.

Like Sequoia, the first phase of the US dollar fund invested a series of companies such as Dianping, Qihoo 360, Amap and so on in two years, which was very successful. In those years, the US dollar fund made money and made a soft hand. Now, including DiDi Global Inc., Meituan and so on, a lot of well-known companies have introduced US dollar funds.

In the last year or two, dollar funds have begun to compete for "hard technology" projects again.Many hard-core projects such as chips, biology, medicine and so on are mainly funded by US dollars.

Funds with better performance, because the returns are very good, the financiers are scrambling to invest money.

Why are dollar funds so popular?

There are many reasons.There are a lot of tax concessions, and both ends, US dollar fund-raising, business done at home, and then the smooth exit of overseas listing, a set of process is very smooth, more flexible than RMB funds.

But if the problem of "accounting standards" cannot be solved, it also means that the game that has been played for 20 years may not be able to play any more.There is no way to exit the investment, it is useless to have a valuation.

So this move in the United States is basically killing two birds with one stone:

●The listing of US stocks is also a form of utilizing foreign capital.Without this channel, we would have lost a channel of capital. As we all know, "attracting foreign investment + exports" is an important engine of our economic development in recent years. If we close this channel, the impact is self-evident.

● If the exit channel is gone, the dollar foundation retreats like a tide.As mentioned earlier, many of their investments in China are high-tech projects. if these supports are lost in the future, the potential impact will be difficult to assess, and many unicorns that can affect the future may not be able to come out.

It is not only a financial war, but also a science and technology war, but such a result is not good for both sides. I hope we can do more communication and try our best to avoid the worst outcome, which requires great wisdom rather than unrealistic noise.

In 2020, it is getting harder and harder.