By: Business Insider
August 17, 2021
Few US investors know that the Chinese government doesn’t let foreigners own or invest in many of the country’s companies, SEC Chairman Gary Gensler said on Monday in his most direct warning about US-listed Chinese stocks yet.
China-based operating companies establish contracts with shell companies in other countries to escape the government’s directive on foreign ownership, Gensler said.
“Those shell companies then raise the money on US exchanges,” he said in a video message on Monday. “So when you think you’re investing in a Chinese company, you’re more than likely actually investing in a shell company in the Caymans or another part of the world.”
His remarks came weeks after the SEC stopped processing IPO listings from Chinese companies, on the grounds that they should meet new disclosure requirements about risks to investors posed by government intervention.