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Minnesota Journal of International Law

Grant Newman

Abstract

The Holding Foreign Companies Accountable Act (“HFCAA” or “the Act”) threatens to prohibit trading in Chinese companies listed in the United States if the Public Certified Accounting Board (“PCAOB”) is unable to oversee their respective Chinese auditors. By assessing the limits of protection the HFCAA offers U.S. investors, this Note argues that the statute’s more fundamental objective is to deter Chinese companies from listing in the United States. Hence, this Note asks whether the HFCAA deters or will deter Chinese companies from listing or remaining listed in the United States. To answer this, this Note examines data collected by the Author on China-based company listings to determine the percentage of China-based company listings on U.S. exchanges over Chinese domestic listings from 2010 to 2023. The results indicate that a higher proportion of Chinese firms have opted to list their stocks domestically since the HFCAA’s passage. Accordingly, the HFCAA has the consequence of benefitting Chinese and Hong Kong exchanges while incentivizing Chinese regulators to increase their control over Chinese companies’ listing destinations. Given recent developments, such as the PCAOB receiving full access to inspect Chinese auditors, an evaluation of the deterrent force of the HFCAA is both timely and provides insight into the ramifications of the HFCAA that will be of interest for U.S. investors and policymakers.

Volume

33

Issue

2

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