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SHANGHAI (Reuters) – Five Chinese state-owned companies, including oil giant Sinopec and China Life Insurance, announced on Friday that they would withdraw from the New York Stock Exchange, amid economic and diplomatic tensions with the United States, according to Reuters.

The companies, which also include Aluminum Corporation of China, PetroChina and Sinopec Shanghai Petrochemical Co, each said they would seek delisting of their U.S. filing shares this month.

The five, which were flagged in May by the US securities regulator as not meeting its auditing standards, will retain their listings on the Hong Kong and mainland China markets.

Beijing and Washington are in talks to resolve a long-running audit dispute that could see Chinese companies banned from US stock exchanges if they fail to comply with US rules.

Washington has long demanded full access to the books of Chinese companies listed in the United States, but Beijing bans foreign inspection of audit documents from local accounting firms, citing national security concerns.

There was no mention of the audit dispute in separate statements from the Chinese companies outlining their moves, which come amid heightened tensions following last week’s visit to Taiwan by US House Speaker Nancy Pelosi.

“These companies have strictly complied with the rules and regulatory requirements of the US capital market since their listing in the United States and made the election for delisting for their own business considerations,” the China Securities Regulatory Commission said in a statement. .

The agency added that it would maintain “open communication with relevant foreign regulatory agencies.”

The oversight dispute, which has been simmering for more than a decade, came to a head in December when the Securities and Exchange Commission finalized rules to potentially ban Chinese companies from trading under the Foreign Corporate Liability Act. . He said 273 businesses were at risk.

Some of China’s biggest companies, including Alibaba Group Holdings, JD Com Inc. and Baidu Inc., are among them. Alibaba said last week it would convert its secondary listing in Hong Kong to a dual primary listing, which analysts said could ease the way for the Chinese e-commerce giant to change its primary listing venue in the future. coming.

In premarket trading on Friday, U.S.-listed shares of China Life Insurance and oil giant Sinopec fell 5.7% to about 4.3% respectively. Aluminum Corporation of China fell 1.7%, while PetroChina lost 4.3%. Sinopec Shanghai Petrochemical Co. lost 4.1%.

A NYSE spokesperson declined to comment. A spokesperson for the Public Company Accounting Oversight Board, the SEC-supervised audit watchdog, did not immediately provide comment.

Lose patience ?

Market watchers were divided on what the write-offs might mean for the audit deal, with some saying it was a bad sign.

“China is sending the message that its patience is running out in audit talks,” said Kai Zhan, senior counsel at Chinese law firm Yuanda, which specializes in U.S. capital markets.

The companies said their volume of shares traded in the United States was low compared to that of their other major listing places.

PetroChina said it had never raised follow-on capital from its U.S. listing and that its bases in Hong Kong and Shanghai “can meet the company’s fundraising requirements” while still offering “better protection of investors’ interests”.

Global fund managers holding U.S.-listed Chinese stocks are gradually turning to their Hong Kong-listed counterparts, though they still hope the audit dispute will eventually be resolved, Reuters reported this week.

“These companies are very thinly traded with a very small U.S. market cap, so it’s not a loss for U.S. capital markets,” wrote Brendan Ahern, CIO of Krane Funds Advisers, which owns a New York-listed fund. focused on Chinese technologies. an email.

He and analysts said the write-offs could pave the way for China to comply with U.S. requirements because the five companies involved likely hold sensitive information that China wouldn’t want disclosed during an audit review.

“We see this as a positive sign. This is consistent with our view China will decide which companies would be allowed to list in the United States and therefore be subject to SEC audit investigations,” Jefferies analysts wrote in a note.

China Life and Chalco said they would file for delisting on Aug. 22, with the delisting taking effect 10 days later. Sinopec, whose full name is China Petroleum & Chemical Corporation, and PetroChina said their applications would be filed on August 29.

China Telecom, China Mobile and China Unicom were delisted from the United States in 2021 after a Trump-era decision to restrict investment in Chinese tech companies.

That decision was left unchanged by the Biden administration amid ongoing tensions.