Days after President Trump denounced China for its unfair trade practices in his United Nations address, Bloomberg published a story citing unnamed sources on Sept. 27 saying that the White House discussed delisting Chinese companies from the stock market.
And with it, the stocks fell—Alibaba, Baidu, and others dropped 2 to 4 percent.
After the rumors were reported, the U.S. Treasury came out to say that it was not contemplating the idea “at this time.”
But the speculation continues online: How serious is delisting Chinese companies from the U.S. stock market?
“It’s huge, I mean it’s almost nuclear. In doing so, that probably means an end to the financial cooperation between the two countries,” said Professor Frank Xie of Aiken University. “But it’s definitely an option that could be used.”
In June 2017, the Chinese Communist Party (CCP) passed legislation making it compulsory for China-based companies to surrender information to the communist state on request, even for those operating abroad. China’s National Security Law, also called the National Intelligence Law, has “done away with the distinction between private and state-owned companies,” a source told the Australian Financial Review in January.
The report did not specify which Chinese companies would be delisted.
It would be difficult, Professor Frank Xie said, to implement something like this. He said it would come at a cost for those investing in Chinese stocks.
“The participants in those pension funds—they need to be protected. They need to be aware of the risk of investing, putting their money in Chinese companies,” said the professor.
And with U.S.-China trade-talks coming up in mid-October, this measure could mean leverage for the president.
Reuters contributed to this article.