The three major operators were forced to delist from the US: the impact was not significant but the intention was obvious

On December 31 last year, the New York Stock Exchange announced that it would initiate the delisting process for China's three major telecom operators in order to comply with the Trump administration's executive order prohibiting Americans from investing in "Chinese companies with military backgrounds." In the following months, this decision based on political purposes has undergone several "face-changing" dramas.

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Regarding the Biden administration's move to continue its predecessor's policies, some industry insiders believe that this move will have little impact on Chinese companies, but the intention to suppress Chinese companies is very obvious, which means that the US suppression of China will not stop because of the change of US government.

“The impact is not significant, but the intention to suppress is obvious”

In the announcement released on May 7, the three major operators all stated that the three Chinese companies had submitted a written request to the New York Stock Exchange on January 20, Eastern Time, asking a committee of the New York Stock Exchange's board of directors to review the delisting decision again. However, on May 6, the committee upheld the original delisting decision, and the New York Stock Exchange will announce the final decision by issuing a press release and posting a notice on its official website. The delisting will take effect 10 days after the U.S. Securities and Exchange Commission (SEC) receives the notice from the New York Stock Exchange.

Announcements issued by three Chinese telecom operators

Observer.com contacted the three major operators, but they all replied that the announcement was the final word and were unwilling to disclose more information.

It is worth mentioning that earlier this year, some US media were optimistic about the NYSE's decision to withdraw its delisting decision. The US financial website "Chief Investment Officer" pointed out in a report in February that "Washington generally believes that although the Biden administration wants to confront China on national security and human rights, its stance in other areas will not be so tough, and investment is one of them."

Now that the New York Stock Exchange is going its own way and forcibly delisting the three Chinese companies, how much impact will that have on them? In the view of the Wall Street Journal, this "has no actual impact."

The report pointed out that although the American depositary receipts (ADRs) of the three Chinese companies have been suspended since January 11 this year, their stocks in Hong Kong continue to trade, and large investors can exchange ADRs for stocks traded in Hong Kong. At the same time, investors from mainland China continue to increase their holdings in these companies.

The Wall Street Journal: Appeal rejected, New York Stock Exchange to delist three Chinese telecom operators

On the other hand, the proportion of ADRs of the three Chinese companies to issued shares is actually not high. According to the announcements released by China Unicom and China Telecom, their ADRs accounted for only 0.2% and 0.14% respectively, so the delisting by the US side has almost no impact on the companies. Although China Mobile has not released ADR data, the outside world generally believes that this number is not high either.

In fact, as early as January 3 this year, my country's Securities Regulatory Commission stated that even if the company is delisted, the impact on the development of related companies and market operations will be quite limited.

The three companies have a large user base, stable fundamentals, and significant influence in the global telecommunications service industry. Their ADRs are not large in size, with a combined market value of less than RMB 20 billion, accounting for only 2.2% of the total share capital of the three companies, of which China Telecom only has about RMB 800 million and China Unicom only has about RMB 1.2 billion. The liquidity is insufficient, the trading volume is small, and the financing function is missing. Even if they are delisted, the direct impact on the company's development and market operation is quite limited.

In addition, these Chinese companies have also gradually started to develop relevant layouts in the domestic market. In addition to China Unicom, which has already been listed on the A-share market, China Telecom also announced in an announcement on April 27 this year that its A-share listing application has been accepted by the China Securities Regulatory Commission, and pre-disclosed its prospectus on the website of the China Securities Regulatory Commission on April 28.

However, the US move has had an adverse impact on some smaller US investors. The Wall Street Journal pointed out that some US investors who hold ADRs of these Chinese companies are now unable to trade these securities because they did not sell them in time. They cannot exchange their ADRs for Hong Kong stocks because their brokerage firms do not support international brokerage accounts.

According to Fierce Wireless, a U.S. communications industry news website, the Trump administration's tough economic and trade policy toward China is one of the few policies that has bipartisan support in Congress. New Street Research, based in New York, believes that, at least in the short term, the Biden administration will not reverse the United States' tough economic and trade policy toward China.

The report said that the US government's policies against Chinese companies such as Huawei and ZTE have lasted for four years, and these actions are "profound and extensive, spanning the political positions of the (two parties in the United States)". As for the New York Stock Exchange's forced delisting of three Chinese companies, the report believes that this will cause concerns from the outside world, because the executive order against the three Chinese companies may be extended to other Chinese companies listed on the New York Stock Exchange, such as Alibaba and Tencent.

Jiang Junmu, chief reporter of my country's industry media C114 Communications Network, said in an interview with Guancha.com that although this incident did not cause much harm to Chinese companies, the political intention was obvious. Since the three major operators were listed on the US stock market in the form of depositary receipts, the liquidity was not strong and the financing effect was not good. From the announcement, one accounted for 0.14% of the issued shares and the other accounted for 0.2%, and the amount involved was also small.

"I think the impact is not significant, but the intention to suppress Chinese companies is obvious. And from this incident we can also see that no matter who comes to power, the suppression of China will not stop," said Jiang Junmu.

The US has changed its mind many times before on whether the three major operators will be delisted

The delisting can be traced back to the middle of last year. In the past year, the US's suppression of Chinese telecom companies has staged many reversals.

Under the Trump administration's policy of deliberately suppressing Chinese companies, the three major operators were included in the so-called "blacklist" by the US Department of Defense in June and August 2020, respectively. The US Department of Defense slandered them as "enterprises controlled by the Chinese military." In November last year, Trump issued another executive order prohibiting Americans from investing in Chinese companies on the Department of Defense's "blacklist."

On December 31, the New York Stock Exchange issued a statement saying that since Trump’s executive order will take effect on January 11, 2021, trading of these Chinese companies will be halted at that time, and therefore these companies are deemed "no longer suitable for listing."

Just a few days later, things took a "reversal". On January 5, the official website of the Intercontinental Exchange (ICE), the parent company of the New York Stock Exchange, announced that based on further guidance from the U.S. Treasury Department's Office of Foreign Assets Control (OFAC), the New York Stock Exchange announced that it no longer plans to delist the three major Chinese operators, and the three companies will continue to be listed and traded on the New York Stock Exchange. On the same day, the three major operators confirmed that they would continue to be listed and traded on the New York Stock Exchange.

However, according to Bloomberg on January 5, then-US Treasury Secretary Mnuchin was very dissatisfied with the decision, and the New York Stock Exchange was reconsidering the delisting plan.

On January 6, the New York Stock Exchange changed its mind again, saying it would continue to push for the delisting of China's three major telecom operators to comply with an executive order signed by US President Trump. In an announcement on the same day, the New York Stock Exchange said that it reversed its previous decision again because the US Treasury Department's Office of Foreign Assets Control (OFAC) issued the latest guidance, which prohibits US investors from conducting certain transactions with the three Chinese telecom companies from January 11, 2021.

Faced with unreasonable suppression from the United States, the three Chinese telecom operators have been actively communicating with the New York Stock Exchange.

In the request for reconsideration filed with the New York Stock Exchange on January 20, the three major operators all stated that since their listing, they have strictly abided by various laws, regulations, market rules and regulatory requirements of the listing places, and operated in compliance with the law. They will continue to closely monitor the progress of related matters, seek professional advice and reserve all rights to protect their legitimate rights and interests.

The China Securities Regulatory Commission said earlier that some political forces in the United States are willing to damage the global status of the U.S. capital market and continue to suppress foreign companies listed in the United States without reason, which reflects the arbitrariness, capriciousness and uncertainty of the rules and systems. This is an unwise behavior. On January 21, Hua Chunying, a spokesperson for the Ministry of Foreign Affairs of my country, also expressed support for the three companies' actions to safeguard their own rights and interests in accordance with the law. She emphasized that the three Chinese companies have issued American depositary receipts and have been listed on the New York Stock Exchange for nearly or more than 20 years. They have always complied with the rules and regulatory requirements of the U.S. securities market and are generally recognized by global investors.