It still feels like yesterday that Jack Ma announced the debut of China's e-commerce giant Alibaba Group at the New York stock exchange in 2014.
The Chinese billionaire invited eight Alibaba customers and employees to ring the bell that has traditionally marked the open and close of trade each day, as a symbol of gratitude to his company's frontline workers and customers.
Those bell-ringers wore matching T-shirts with a quote from Mr Ma printed on the front: "Keep your dream, in case it comes true".
Jack Ma's American dream of being listed on the US stock market has been widely shared by Chinese entrepreneurs over recent decades.
Currently, there are 261 Chinese companies listed on the New York stock exchange, with a combined capital worth approximately $1.9 trillion.
But some of them may be about to lose this dream.
In May, the US Securities and Exchange Commission (SEC) announced that more than 80 companies — including Chinese e-commerce giant JD.com and video platform Bilibili — faced the risk of being delisted.
They joined a growing list of Chinese companies — from tech front-runner Baidu to fast food chain Yum China — that the SEC says will be expelled from the US capital market in 2024 unless they comply with new auditing standards over the next two years.
"This is part of the larger context of US concerns about Chinese companies' operations in the United States," said Professor Andrew Walter, who specialises in international finance at the University of Melbourne.
While the SEC warnings are the Biden administration's latest action in the ongoing US-China financial war, the move can be traced back to a financial saga that began two decades ago.
The fall of Wall Street darling
In 2001, the financial world was rocked by a scandal that took down energy giant and Wall Street darling Enron Corp, then widely considered among the largest and most innovative companies in the US.
After it was revealed that Enron had used creative accounting to cover up corporate fraud and corruption, the company filed for bankruptcy, resulting in $US11 billion in shareholder losses.
In response, the US introduced the Sarbanes-Oxley Act in 2002, requiring all publicly listed companies, both domestic and international, to allow US regulators to inspect their audits.
However, for years, China and Hong Kong have rejected requests from the SEC on national security grounds, which has left regulations in a state of limbo for decades.
While the administration of Donald Trump and the ongoing US-China trade war have pushed US authorities to tackle the issue, the straw that broke the camel's back was the fraud perpetrated by Luckin Coffee.
Founded in 2017, the chain launched almost 2,400 coffeehouses across China within two years, and began trading on the Nasdaq in 2019, raising $US645 million through its initial public offering.
It was one of the biggest listings by a mainland Chinese company in the US that year. A rising star, it looked set to compete with the likes of Starbucks and Costa.
But soon Luckin Coffee was accused of inflating revenue. In 2020, an internal investigation revealed its leadership faked $US310 million in sales for the previous year.
The company has now been delisted by the Nasdaq, and it emerged from bankruptcy proceedings last month. However, its fall has alerted US regulators who had already begun scrutinising Chinese companies.
At the end of 2020, US Congress passed a bill that prevents Chinese companies from listing on the New York stock exchange if they refuse to comply with US auditing processes.
The Biden administration also appointed Gary Gensler as the chair of the SEC, which Professor Walter described as "probably one of the most important Biden administration appointments".
Widely known for his pledge to increase reporting transparency, Mr Gensler has proposed a mandatory climate risk disclosure for public companies.
"Gensler would probably say, 'Look, what we're doing is really just trying to increase reporting transparency for US investors'," Professor Walter said.
"[And the measures will] reduce concerns that Chinese companies might, in some cases, be hiding information from investors that might create market volatility and bad outcomes for US investors."
Chinese billionaires now face a dilemma
Many Chinese corporations may actually be willing to comply with the US standards, according to Jeremy Mark, a non-resident fellow at the Atlantic Council and a former Wall Street Journal reporter.
"Most Chinese companies are quite open to having their books audited," he said. "They want to be a listed company in good standing in the United States, largely for the access to capital."
Mr Mark said Chinese entrepreneurs' hunt for US capital could be traced back to the 1990s, when economic reforms and privatisation of state enterprises opened the floodgates for Chinese investors looking for somewhere to grow their money.
Beijing even encouraged corporations to reach out for foreign investments, because there was a lack of capital flow in the domestic market.
Today, despite China's rapid economic growth, Chinese entrepreneurs still see Wall Street as their dream land for global reputations and more flexible access to capital.
Mr Fok said some Chinese entrepreneurs were also concerned about their private property rights and protections offered by the domestic market, which pushed them to choose listing overseas rather than in China.
However, Beijing has begun to crack down on billionaires and tech giants for "common prosperity", with the government targeting overseas-listed companies whose wealth it is unable to trace.
China is also worried that allowing the US to audit materials of Chinese companies could be used against Beijing in the next stage of the US-China trade war.
In July 2021, after a meeting with Beijing officials, Tiktok owner ByteDance scrapped its plan to list in the US. Regulators had asked the company to "focus on data security risks".
"So, for all these sorts of reasons, the Chinese [authorities] would prefer to see those companies listed in the domestic market," Mr Fok said.
"It's not necessarily the choice of a private businessman, but it is the desire of the state."
What is Beijing's response so far?
One could expect Beijing to take a firm stance against the US on this issue — but that's not happening, yet.
Over the past few weeks, China's financial watchdog said it was willing to change the secrecy laws that prevent US regulators from inspecting Chinese companies listed in New York.
It announced that foreign regulators might request to "investigate" or "inspect" overseas-listed Chinese companies and their auditors.
However, the Atlantic Council's Jeremy Mark said there were still questions about the level of access that China would give to US regulators, as it also signalled it would prefer some Chinese companies to be delisted rather than opening the audit book.
Beijing also encouraged Chinese companies to turn to Hong Kong rather than the US to access foreign capital.
Last week, Didi, known as China's Uber, announced it would delist from the US and relist in Hong Kong, just a year after it made its New York debut.
Mr Fok — who served as a senior executive at Hong Kong Exchanges and Clearing for nine years — said Hong Kong could give Chinese companies the same access to foreign capital as New York, while insulating them from the geopolitical risks they would face in the US.
However, Hong Kong's National Security Law may raise doubts from international investors over the city's future as a global financial hub, according to Professor Walter.
"I think non-Chinese global companies probably see Hong Kong as far less attractive today than they would have five years ago," he said.
"But Chinese companies don't have a lot of choices here."
In a speech at the International Council of Securities Association in May, YJ Fisher, the director of the SEC's Office of International Affairs, stressed that the SEC's inspection of Chinese and Hong Kong companies' audit papers did "not raise national security issues".
Ms Fisher also emphasised the necessity of resolving audit issues with China and Hong Kong to protect US investors with a growing interest in the Chinese market.
She also said time was "running out" to resolve the issues.
"Even if the [US regulators] and Chinese authorities reach an agreement on proceeding with inspections and investigations, we still have a long way to go," she added.
Lessons for Australia
While the Australian Securities Exchange (ASX) is also a popular choice for Chinese companies seeking foreign investment, over the years there has been a huge drop — from 55 ASX-listed Chinese companies in 2017 to just 15 this year.
A spokesperson said the ASX had tightened its admission rules over the past eight years, and the number of companies being delisted or rejected was "indicative of the steps ASX is taking to ensure standards are kept high".
"Every company listed on ASX, from whichever country they come [from] — including from emerging markets, which includes but is not exclusively China — must satisfy ASX admission requirements and then meet ongoing compliance obligations," they said in a statement.
Tim Murray — co-founder of J Capital — described the US-China audit dispute as the new reality that foreign investors, including Australia's, should be aware of.
"It's not like that anymore. "
