ABSTRACT
This chapter looks into the systematic rift between China and liberal democratic countries on the corporate governance regime and the relevant capital market regulations. The Chinese corporate governance regime underwent a significant evolution during the period 1979–2010, when the Western corporate governance model was brought in. During this period, Chinese companies, either state-owned or private, started to respond to the investor-shareholders’ interests, instead of the interests of the party/government. Starting in 2011, however, the trend appeared to turn around. The Chinese party-state attempted to exercise intensive control over the companies, more than reversing the achievements of the previous reforms. Because of this internal intervening policy, the Chinese government does not allow listed Chinese companies on the NYSE (New York Stock Exchange) to reveal their accounting documents to the US PCAOB (Public Company Accounting Oversight Board). This has led to conflicts on various issues between the US and China. The primary concerns surround the idea of accountability: are Chinese companies listed on the NYSE accountable to the public, or to the CCP? For instance, China suspended the Ant Group’s initial public offering in Shanghai and Hong Kong in November 2020. This was not only a slapdown for Jack Ma. Alibaba shares on the NYSE ‘closed more than 8% lower overnight’, 1 and foreign investors unexpectedly faced tremendous loss and could not hold anyone accountable. This chapter helps us understand why the HFCAA was passed in the US.
