Explainer | What should investors do as China Mobile, other telecoms companies face US delisting?

Three of China’s biggest telecommunications companies are set to be delisted from the New York Stock Exchange (NYSE) as soon as January 7 as the American bourse seeks to comply with an executive order that bars trading in companies with ties to China’s military.

The delistings of China Mobile, China Telecom and China Unicom could foreshadow further US listing exits by Chinese companies, particularly those deemed to have military ties, as President Donald Trump imposes additional barriers for Chinese firms to access to American capital markets.

The executive order is the latest escalation of tensions between Washington and Beijing in the waning days of the Trump administration, but little is expected to change when President-elect Joe Biden takes office on January 20. The Biden administration’s foreign policy is expected to be more predictable than President Trump’s, but both Democrats and Republicans remain wary of China.

“The People’s Republic of China (PRC) is increasingly exploiting United States capital to resource and to enable the development and modernisation of its military, intelligence, and other security apparatuses, which continues to allow the PRC to directly threaten the United States homeland and United States forces overseas,” the November 12 decree said.

The order, which bars American investors from holding shares or securities in nearly three dozen companies identified as being controlled or owned by the Chinese armed forces, prompted major index providers, including MSCI and S&P Dow Jones Indices, to drop a number of the firms from their global bond and stock indices last month.

It comes as global investors have been increasing their weighting of Chinese debt and stocks in recent years as Beijing further opens up its markets to foreign investment and hedge funds and assets managers seek to tap growth in the mainland, particularly as the Chinese economy is expected to recover at a faster pace than many developed markets from the fallout of the coronavirus pandemic.