ICYMI: Sullivan Talks Holding U.S.-Listed Chinese Companies Accountable, Infrastructure Bill on CNBC Squawk Box
WASHINGTON—U.S. Senator Dan Sullivan (R-Alaska) spoke with Becky Quick and Joe Kernen on CNBC’s Squawk Box this morning about his letter, with Sen. John Kennedy (R-La.), to Chairman of the U.S. Securities and Exchange Commission (SEC) Gary Gensler on behalf of American investors urging the SEC to enforce transparency requirements for Chinese companies listed on U.S. stock exchanges. Sen. Sullivan’s request comes as the result of the recent initial public offering (IPO) by the Chinese ride-hailing company Didi, and subsequent enforcement actions by the Chinese Communist Party (CCP) that are still reverberating throughout the broader stock market. On Friday, Chairman Gensler stated publicly that the SEC would increase scrutiny of Chinese companies seeking to be listed on U.S. exchanges.
Quick and Kernen also asked Sen. Sullivan about whether he supports the bipartisan infrastructure bill recently announced in the U.S. Senate, or President Joe Biden’s additional $3.5 trillion spending bill.
Quick: The U.S. government is looking to shine more light on Chinese companies that list right here in America. On Friday, SEC Chairman Gary Gensler outlined some new disclosures that his agency is going to be seeking. This follows China's recent crackdown on education and tech companies, including ride-hailing firm Didi immediately after it went public here in the United States. Last week, a group of senators including our next guest, called on the SEC to get tougher on Chinese corporate transparency. Joining us right now is Alaska Republican Senator Dan Sullivan. Senator, thank you for being here. First of all, let's talk a little bit about the terms here. China has been cracking down. It has meant a lot of volatility in the share prices and you think U.S. investors are at risk. What did you say to the SEC?
Sullivan: We wrote the chairman and then I actually spoke to him over the weekend. But I think this issue, the Didi issue, it raises investor risk issues, certainly, investor protection issues. But it also highlights other broader strategic U.S.-China issues. But with regard to the investor risk issue, I don't think our investors fully understand when they purchase a Chinese company on an American exchange, what they're actually purchasing. It is almost always an offshore shell company—no equity—that is subject to the whims of the Chinese Communist Party. That's what you're purchasing. I don't think a lot of our pension funds understand that. I was glad to see that in the guidance that Chairman Gensler put out on Friday, he said that they're going to focus a lot more on what these are called, Variable Interest Entity issues, VIEs, and they're going to focus a lot more on these, and it's important.
Quick: It's a mouthful and it's definitely something that we've been watching too. Didi, for instance, raised $4 billion. Most of that came from U.S. investors. The guidance that we've heard from the SEC, from Gary Gensler, on Friday, does it go far enough in your opinion?
Sullivan: I'm glad they're focused on it. And the other thing that I talked to him about, and we put in our letter, is that he needs to fully and expeditiously enforce the Holding Foreign Companies Accountable Act. That was a bipartisan bill passed in the Senate and House unanimously this past December. And it's a simple bill. It says if you're a Chinese company that's listed on an American exchange and you do not undergo the same audits that an American company listed on American exchanges undergoes, then you're going to be delisted. You have three years to do that. I'm very doubtful that they're going to do that. That bill also requires disclosure of these Chinese companies ties to the Chinese Communist Party, (and) to the military. It's going to be very interesting to see if they actually do undertake these audits that American firms listed on American exchanges have to do and, if they don't, they should be delisted and that's what the SEC is going to focus on. They need to expeditiously do that. I believe the clock is already ticking on that bill. It gives them three years and, you know, Becky, interestingly enough, the Senate is very focused on that. In June, we passed a bill saying actually the clock on this should be two years, and that was unanimous in the Senate too.
Quick: Is there any scenario under which you'd like to see a Chinese company list on the U.S. exchanges? Because what you've laid out is something that just about none of them meet.
Sullivan: It's asking a very simple requirement. If you're going to list on an American exchange you should be subject to the same rules that an American company listing on an American exchange should be. That's not asking a lot actually at all. It's been almost two decades that we've looked the other way to enable these companies to do this. And, remember, investors are probably not that certain that when they invest in these companies listed on American exchanges what they're getting. They're not getting equity in the company at all. The other thing is, I think this is just the tip of the iceberg. There's other requirements for U.S. companies, say, for example, Foreign Corrupt Practices Act, that, my view is, we should subject Chinese companies that are listed on American exchanges to these same requirements. We will level the playing field for what other American companies that are listed have to undertake. I just think it's an issue of fairness and leveling the playing field.
Kernen: Hey, senator, are you supporting the bipartisan infrastructure plan?
Sullivan: Joe, I've been a “no” on the two votes to proceed to the bill. And the simple reason I've told my constituents back home in Alaska is because there hasn't been a bill. There's been no text and we finally got text last night. I'm going to dig into this with my team. As a matter of fact, I'm already doing that and I'm going to be looking for some important issues. One issue that gets overlooked is how much serious permitting reform is in this legislation. It's an issue I care deeply about. In America it takes almost nine years to permit a bridge, nine to 19 years to permit and build a highway. We had a gold mine in Alaska—it took 20 years to permit. You could have a $10 trillion infrastructure bill and, if you don’t fix the broken permitting system in America, you’re not going to be able to deploy this capital. That issue is really important to me. You may have seen the Business Roundtable put a statement out, essentially saying: Serious permitting reform could bring up to $400 billion dollars of private capital into infrastructure. I'm going to be digging into it, but until last night, we didn't have a bill to actually read.
Kernen: Senator Romney said that the $3.5 trillion dollar bill is coming either way. I don't know whether—obviously, you don't know what Speaker Pelosi is thinking, but does that make sense to you? That you might as well get some good things done in a bipartisan way? I'm speaking for Senator Romney and, because you can't, it has nothing to do with the follow-on $3.5 trillion. Do you agree with that?
Sullivan: I view them separately, but you've been hearing Speaker Pelosi, she views them as tied together. You were talking about inflation in your last segment. Between the American Recovery Act—that was two trillion (dollars), purely partisan—in February, and, if they're talking (about) 3.5 trillion (dollars), we're talking over five trillion (dollars) in partisan spending. And, if Chairman Powell or others don't think that's going to juice inflation, I don't know what will. I have a huge problem with that bill. Whether or not they're linked I think is going to be part of the discussion here. Most people want physical infrastructure. My state certainly needs it. But the reckless spending that you're seeing on behalf of the Democrats right now is going to do some real damage to our long-term interests and our economy. And I think it's going to keep driving inflation.
Quick: Senator, you said you'd like to see the real infrastructure spending. You said you're digging through the bill, but if it doesn't have the permitting changes that you've talked about, would that keep you from voting for this bill?
Sullivan: I'm going to look at all aspects of this, what it does for my state, what we need in terms of our country's infrastructure. We certainly need it. But, to me, that's an often overlooked component of infrastructure. Permitting sounds wonky. It's actually quite important. I've been pressing for it with our Republican negotiators from day one and I'm going to be very interested to see how far it went. I'll tell you this—Democrats have almost zero interest in that issue. The one good thing that's come out of here, if there is good permitting reform in it, I can guarantee it's almost exclusively driven by the Republicans who are negotiating this bill.
Quick: Senator, I want to thank you for your time today. It's good to see you.
Sullivan: Thanks, Becky. Thanks, Joe.
# # #
Next Article Previous Article