The delisting of U.S.-listed Chinese language shares might come within the subsequent two to a few years, in line with Jamie Allen of the Asian Company Governance Affiliation.
“There would not appear to be an enormous incentive … for China to compromise, nor does the U.S. appear to need to compromise,” the secretary normal on the non-profit group informed CNBC’s “Squawk Box Asia” on Tuesday.
With each side showing to dig of their heels, Allen mentioned delisting for U.S.-listed Chinese language companies is ready to start out in just a few years.
“There are some discussions ongoing for the time being between the 2 sides, however these discussions have been going round in circles for fairly a very long time,” he mentioned. “Until there’s some change within the geopolitical relationship between these two international locations, it does appear to us that in two or three years you’ll begin to see delisting.”
Many Chinese language companies have used the variable curiosity entity (VIE) construction to listing stateside. That is accomplished by creating an inventory by way of a shell firm, usually primarily based within the Cayman Islands, in impact stopping traders within the U.S.-listed shares from having majority voting rights over the Chinese language firm.
For now, the Chinese language authorities seems “prepared to dwell” with the VIE construction regardless of it current in a “very grey space” that doesn’t technically adjust to China’s nationwide coverage on international possession of delicate sectors, Allen mentioned.
In December, Chinese language regulators launched new guidelines for abroad listings, with no ban being placed on the popular VIE structure.
“It is a type of handy means for the Chinese language state to permit personal corporations to listing abroad with out affecting, strictly talking, the type of possession restrictions in China on tech companies and value-added telecom providers,” he mentioned.