China Hawks Call for SEC to Delist PRC Firms

Rep. John Moolenaar (R-WI), Chairman of the House Select Committee on the Chinese Communist Party, and Sen. Rick Scott (R-FL), Chairman of the Senate Aging Committee, called on the Securities and Exchange Commission (SEC) to delist Chinese companies tied to the Chinese Communist Party (CCP) from U.S. exchanges, citing serious national security concerns and investor risks.

In a 32 page joint letter addressed to SEC Chairman Paul Atkins, the lawmakers specifically named major Chinese firms such as Alibaba, Baidu, Hesai, and Zeekr, accusing them of leveraging American capital markets while advancing CCP objectives such as military modernization, surveillance, and forced labor practices.

“These companies are not just commercial entities; they are instruments of the Chinese Communist Party’s broader strategy to undermine U.S. interests,” Chairman Moolenaar stated. "The SEC must act decisively to protect American investors and national security."

The lawmakers highlighted that U.S. retirement accounts and pension funds may unknowingly be investing in firms deeply embedded within China’s military-industrial complex and surveillance state. Additionally, they pointed out that these companies often evade full audits, use opaque ownership structures, and conceal their connections to CCP activities, creating significant transparency and compliance issues for U.S. investors.

Citing the Holding Foreign Companies Accountable Act and Sections 12(j) and 12(k) of the Securities Exchange Act, the letter urged immediate action by the SEC to suspend or delist firms unable or unwilling to comply with U.S. disclosure and audit standards.

Several of the companies cited are included in the Deparment of Defense's annual Section 1260H update required by the National Defense Authorization Act. The 1260H List consists of companies operating directly or indirectly in the US that are believed to be engaging in providing commercial services, manufacturing, production or exports related to the Chinese military.

It is important to distinguish this list from the more stringent Non-SDN Chinese Military-Industrial Complex Companies (NS-CMIC) list, which includes companies owned or controlled by the Chinese military and providing related business services. The NS-CMIC list prohibits US investors from trading in these stocks and may impact a company’s operations in the US.

In contrast, inclusion on the S1260H list does not impose any direct restrictions on a company’s operations or stock ownership. The primary concern for investors is reputational risk, as well as the possibility that the company could be added to stricter lists in future.

[Letter]