Not too long ago, Chinese companies listed on US stock exchanges were an endangered species. Bears had pounced on them after short sellers exposed fraud after fraud. And a Washington-Beijing regulatory dispute over auditing threatened them all, even the good ones, with a mass delisting.
But investors are not usually known for their long memories, and so it has proved in this instance. Concerns about both the quality of US-listed Chinese companies and the legal standing of their cross-border listings have melted away like the snows of Sochi. Chinese stocks traded in the US have rebounded and the market has reopened to new listings. Is the renewed confidence of investors well-founded or misplaced? It is understandable, up to a point. Chinese companies have faced scrutiny thanks to the short sellers, and those still standing are seen to be strong. Investors can also be excused for tuning out the regulatory dispute over auditors – it has rumbled on for two years and could well continue for another two.
Nevertheless, just because the audit dispute has dragged on for so long does not mean it will end well. Events in the past month point to a hardening of attitudes on both the Chinese and US sides that could put US-listed Chinese companies back on the endangered list.