Everyone can see that the diplomatic, economic, and trade relationship between the United States and China is deteriorating. A subset of the issues plaguing the relationship stem from recent fraudulent behavior from Chinese companies listed in US markets.

Washington is trying to fight the opacity of these publicly traded Chinese firms to protect US investors, in part spurred by revelations of Luckin Coffee’s fraudulent behavior earlier this year. The last month has seen the SEC open investigations into two more US-listed Chinese tech companies, while US politicians are considering a delisting ultimatum to force Chinese companies to provide more information to regulators.

Bottom line: US authorities have long complained about their ability to scrutinize Chinese companies’ books, but China's rules don't clearly forbid it and SEC investigations into Iqiyi and GSX Techedu could be a chance to make a deal. Nothing is set in stone (or law) yet, but Chinese companies are already moving to what is, perhaps, a better home for them: Hong Kong.

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James Hull

James is an analyst and portfolio manager at Hullx Capital and co-host of the China Tech Investor Podcast, powered by Technode.