An accounting scandal at Luckin Coffee stunned its American owners in early 2020, causing the coffeehouse chain’s stock price to plummet.
Luckin Coffee drew attention to a problem: American investors had little knowledge of Chinese firm financials, despite the fact that the stocks were freely traded on US exchanges. The episode aroused speculation about whether further crises involving Chinese companies listed on the New York Stock Exchange were on the horizon.
By passing the Holding Foreign Companies Accountable Act that year, Congress took action to prevent the next Luckin. Chinese corporations were given an ultimatum by the law: either be delisted or meet the accounting transparency rules that other US-listed foreign companies already obey.
The matter is now in the hands of regulators, including Securities and Exchange Commission Chair Gary Gensler, who provided an update in a new interview with Andy Serwer for Influencers this week.
‘We’ve had some nice interactions with our counterparts from China,’ Gensler said of the nonprofit company he oversees, the Public Company Accounting Oversight Board (PCAOB). ‘However, the Chinese government have the last say.’
‘There is a route ahead’ if China changes course, he argues. Otherwise, ‘Congress has spoken: roughly 250 Chinese companies’ would be forced to stop trading in the United States ‘as soon as 2024.’
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