Concerns Rise on Delisting of Chinese Firms on US Exchanges

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Concern over the spiralling trade war between the US and China has spurred questions about the ramifications of worst-case scenarios for investors.

The intensifying trade dispute – and a remark by one of President Trump’s top financial policymakers – has put the spotlight back on possible forced delisting of Chinese companies from US stock exchanges.

During the Biden administration, Chinese companies’ American Depositary Receipts (ADRs) faced significant delisting pressure due to audit disputes, causing their shares to tumble.

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More than 100 Chinese companies, including tech giants Alibaba and JD.com, are listed on US exchanges and have a collective market cap of around $1 trillion.

Companies without a secondary listing, such as PDD, which operates e-commerce platforms Pinduoduo and Temu, and Full Truck Alliance, China’s “Uber for trucks”, would be the most vulnerable if a forced delisting happened.

Converting shares from the US to Hong Kong stock exchange could drain liquidity and harm valuations. Companies may also face the risk of US state funds divesting.

“ADRs are the biggest hostage situation in financial history,” said Fan Liwen, a portfolio manager at Shenzhen New Thinking Investment Management Co.

‘Switch to Hong Kong’

“If you must hold ADRs, you should switch to the Hong Kong Stock Exchange. Chinese companies listed as ADRs should push for listing in Hong Kong.”

“Everything’s on the table,” was Treasury Secretary Scott Bessent’s response when asked about removing Chinese stocks from US exchanges in a TV interview last week.

“If Chinese ADRs wish to return, Hong Kong must become their first choice,” Hong Kong’s Finance Secretary Paul Chan said, adding that the security regulator and stock exchange had been told to prepare.

The daily turnover for all ADRs included in the MSCI China Index is about $8.1 billion, roughly a quarter of the daily turnover of the Hong Kong market, according to Morgan Stanley.

Goldman Sachs estimates that US institutional investors currently own about $830 billion in Chinese stocks including ADRs and has said they may have to offload them if financial decoupling between China and the US peaks.