Power

The NYSE China flip-flop is part of a bigger battle between profit and accountability

Western investors want transparency. But what if guaranteeing that closes a door on the U.S. profiting from China's tech success?

The NYSE China flip-flop is part of a bigger battle between profit and accountability

The New York Stock Exchange can't decide whether to delist certain Chinese tech apps.

Photo: Julien Chatelain

The New York Stock Exchange's flip-flopping statements this week over the delisting of Chinese tech stocks highlight a longstanding dispute over how much access Chinese corporations should have to U.S. capital markets. It's a debate that some experts say pits profit against accountability, and one that will likely continue under the Biden administration.

The confusion began last week, when the NYSE announced that it would delist the stocks of three Chinese telecom companies — China Telecom, China Mobile and China Unicom — to comply with the Trump administration's order in November barring U.S. companies and individuals from investing in Chinese firms that work with the Chinese military.

The NYSE reversed that decision on Monday, only to change it again on Wednesday when it reaffirmed the plan to delist the stocks. Trading in the Chinese telecom company shares will cease at 4 a.m. Eastern Time on Jan. 11, the NYSE said.

The NYSE could not be reached for further comment.

Stephen Diamond, a law professor at Santa Clara University, said the exchange may have been caught flat-footed by yet another unexpected move by the Trump administration, which has been waging a bitter trade and economic war against China. "The NYSE just got caught in this whole mess that is Trump," he told Protocol. "It's like every other administrative effort. It's driven by Trump's ego, not by rational policy."

A report by The Wall Street Journal on Thursday suggested that U.S. officials are also considering a ban on Americans investing in Alibaba and Tencent.

The NYSE announced that its delisting would be pushed through after Treasury Secretary Steven Mnuchin told it that he disagreed with the reversal, according to CNBC. Diamond said delisting the Chinese companies' stocks was clearly not in the interest of the NYSE.

"They didn't want to do this in the first place, probably," he said. "The NYSE has been pretty aggressive about courting Chinese stocks. … It earns revenue from listing fees and trading commissions. … Their motivation is to obviously keep as many of these listings as they can."

Edith Yeung, a general partner at venture firm Race Capital, who writes the China Internet Report, said delisting Chinese companies could also drive many Chinese firms to other exchanges, shutting out U.S. investors from fast-growing businesses. Of the private companies globally that raised the most funding in 2020, the top 10 raised $13.6 billion combined, and six of those 10 were based in China, she said, citing Crunchbase data.

"The Treasury Department and the New York Stock Exchange need to make up their mind," Yeung told Protocol. "If U.S. IPO markets continue to jerk Chinese companies around, it will send a really unwelcome signal to these high-growth Chinese companies that maybe they should consider listing in Hong Kong and Shanghai instead."

But Diamond said the NYSE's move also turns the spotlight on longtime concerns about the lack of transparency and accountability from many Chinese corporations. The latest was Luckin Coffee, which was delisted from the Nasdaq after reportedly being under investigation after disclosing financial fraud. With many Chinese companies, "things like corporate governance or shareholder rights … don't exist in any meaningful way," he said.

Diamond cited the recent controversy over Chinese tech titan Jack Ma, who has reportedly been forced to keep a low profile amid an apparent dispute with the Chinese government. Beijing is reportedly pressuring Ant Group — the Chinese fintech that was on the cusp of a record-breaking IPO and for which Ma is the major shareholder — to share the financial giant's consumer-credit data.

"If Jack Ma disappears, what is CalPERS going to be able to do about an investment it makes?" Diamond said, referring to the California Public Employees' Retirement System, a major institutional investor. "Nothing."

"This whole issue of Chinese access to the U.S. capital market is a critical issue that has to get taken seriously by the new SEC and the new administration," he said. "As ham-handed and clumsy and, frankly, sometimes even racist some of the criticisms [by] the Trump administration have been of China, there is a real issue about transparency and accountability for Western investors."

In fact, the incoming Biden administration is widely expected to rebuild traditional U.S. alliances as a way to counter China's growing influence, especially on the economic front. Biden plans to meet with some of the world's major leaders at an international gathering called Summit for Democracy. China and Russia are not expected to be invited.

Charles Elson, a finance professor at the University of Delaware and a corporate governance expert, said the controversy over the delisting of Chinese telecom stocks underscores the balancing act that the NYSE is often forced to undertake.

"By delisting, you lose the revenue from those listings," he told Protocol. "By including those listings, you get the revenue — but there's a public perception issue. Are you supporting a position that's antithetical to the national interests of the United States?"
Fintech

Judge Zia Faruqui is trying to teach you crypto, one ‘SNL’ reference at a time

His decisions on major cryptocurrency cases have quoted "The Big Lebowski," "SNL," and "Dr. Strangelove." That’s because he wants you — yes, you — to read them.

The ways Zia Faruqui (right) has weighed on cases that have come before him can give lawyers clues as to what legal frameworks will pass muster.

Photo: Carolyn Van Houten/The Washington Post via Getty Images

“Cryptocurrency and related software analytics tools are ‘The wave of the future, Dude. One hundred percent electronic.’”

That’s not a quote from "The Big Lebowski" — at least, not directly. It’s a quote from a Washington, D.C., district court memorandum opinion on the role cryptocurrency analytics tools can play in government investigations. The author is Magistrate Judge Zia Faruqui.

Keep Reading Show less
Veronica Irwin

Veronica Irwin (@vronirwin) is a San Francisco-based reporter at Protocol covering fintech. Previously she was at the San Francisco Examiner, covering tech from a hyper-local angle. Before that, her byline was featured in SF Weekly, The Nation, Techworker, Ms. Magazine and The Frisc.

The financial technology transformation is driving competition, creating consumer choice, and shaping the future of finance. Hear from seven fintech leaders who are reshaping the future of finance, and join the inaugural Financial Technology Association Fintech Summit to learn more.

Keep Reading Show less
FTA
The Financial Technology Association (FTA) represents industry leaders shaping the future of finance. We champion the power of technology-centered financial services and advocate for the modernization of financial regulation to support inclusion and responsible innovation.
Enterprise

AWS CEO: The cloud isn’t just about technology

As AWS preps for its annual re:Invent conference, Adam Selipsky talks product strategy, support for hybrid environments, and the value of the cloud in uncertain economic times.

Photo: Noah Berger/Getty Images for Amazon Web Services

AWS is gearing up for re:Invent, its annual cloud computing conference where announcements this year are expected to focus on its end-to-end data strategy and delivering new industry-specific services.

It will be the second re:Invent with CEO Adam Selipsky as leader of the industry’s largest cloud provider after his return last year to AWS from data visualization company Tableau Software.

Keep Reading Show less
Donna Goodison

Donna Goodison (@dgoodison) is Protocol's senior reporter focusing on enterprise infrastructure technology, from the 'Big 3' cloud computing providers to data centers. She previously covered the public cloud at CRN after 15 years as a business reporter for the Boston Herald. Based in Massachusetts, she also has worked as a Boston Globe freelancer, business reporter at the Boston Business Journal and real estate reporter at Banker & Tradesman after toiling at weekly newspapers.

Image: Protocol

We launched Protocol in February 2020 to cover the evolving power center of tech. It is with deep sadness that just under three years later, we are winding down the publication.

As of today, we will not publish any more stories. All of our newsletters, apart from our flagship, Source Code, will no longer be sent. Source Code will be published and sent for the next few weeks, but it will also close down in December.

Keep Reading Show less
Bennett Richardson

Bennett Richardson ( @bennettrich) is the president of Protocol. Prior to joining Protocol in 2019, Bennett was executive director of global strategic partnerships at POLITICO, where he led strategic growth efforts including POLITICO's European expansion in Brussels and POLITICO's creative agency POLITICO Focus during his six years with the company. Prior to POLITICO, Bennett was co-founder and CMO of Hinge, the mobile dating company recently acquired by Match Group. Bennett began his career in digital and social brand marketing working with major brands across tech, energy, and health care at leading marketing and communications agencies including Edelman and GMMB. Bennett is originally from Portland, Maine, and received his bachelor's degree from Colgate University.

Enterprise

Why large enterprises struggle to find suitable platforms for MLops

As companies expand their use of AI beyond running just a few machine learning models, and as larger enterprises go from deploying hundreds of models to thousands and even millions of models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

As companies expand their use of AI beyond running just a few machine learning models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

Photo: artpartner-images via Getty Images

On any given day, Lily AI runs hundreds of machine learning models using computer vision and natural language processing that are customized for its retail and ecommerce clients to make website product recommendations, forecast demand, and plan merchandising. But this spring when the company was in the market for a machine learning operations platform to manage its expanding model roster, it wasn’t easy to find a suitable off-the-shelf system that could handle such a large number of models in deployment while also meeting other criteria.

Some MLops platforms are not well-suited for maintaining even more than 10 machine learning models when it comes to keeping track of data, navigating their user interfaces, or reporting capabilities, Matthew Nokleby, machine learning manager for Lily AI’s product intelligence team, told Protocol earlier this year. “The duct tape starts to show,” he said.

Keep Reading Show less
Kate Kaye

Kate Kaye is an award-winning multimedia reporter digging deep and telling print, digital and audio stories. She covers AI and data for Protocol. Her reporting on AI and tech ethics issues has been published in OneZero, Fast Company, MIT Technology Review, CityLab, Ad Age and Digiday and heard on NPR. Kate is the creator of RedTailMedia.org and is the author of "Campaign '08: A Turning Point for Digital Media," a book about how the 2008 presidential campaigns used digital media and data.

Latest Stories
Bulletins