“It is time for China to blink first,” said Representative Sherman, who is the main driver of China’s foreclosure law.

“The point here is not to remove or unsubscribe from the list, it is to demand that China do what all other countries have done and accept that if their companies want to participate in the US financial markets. USA , agree to live by the rules of the US capital market. UNITED STATES “Sherman argued in an interview with MarketWatch. “It is time for China to blink first for the benefit of investors.”

See also: Emerging debt crisis could be the next front in the US-China conflict

Sherman presented a homemade version of the foreign corporate responsibility law Wednesday night after the bill was passed by the Republican-controlled Senate earlier today with unanimous support.

The bill would require foreign companies to let the Public Business Accounting Oversight Board oversee the audit of their financial records if they want to raise funds by selling stocks or bonds to the American public. All American companies and most foreign companies already work with PCAOB in this way, but not Chinese companies.

The PCAOB was created by the Sarbanes-Oxley Act of 2002, in response to the collapse of companies like Enron and WorldCom, after the auditors of these companies did not discover financial deception. The role of the PCAOB is to audit auditors and provide another layer of protection to American investors.

This bill was never intended to exempt foreign countries, said Sherman, but the financial services sector has lobbied to include Chinese companies as the world’s largest and fastest growing economy. As Chinese investors demand for securities increased, the Securities and Exchange Commission reached a compromise with Chinese regulators in 2013 that paved the way for the widespread inclusion of Chinese companies, including tech giants like Alibaba Group Holding Ltd.
VASE
-5.87%
Baidu Inc.
BIDU
-6.09%
and JD.com Inc.
JD
-5.07%.

The 2013 agreement was to lead to better PCAOB access to Chinese audit documents, but “China has reneged on its commitments,” said Sherman. “Basically, China has become tough and we have weakened.”

Sherman introduced a similar bill last year, but as anti-Chinese sentiment grew in Washington, he said there was now bipartisan support for measures like this that weren’t previously supported only by skeptical factions of the US financial industry. . United States With a growing anti-Chinese sentiment, he thinks his bill will be passed before the end of the summer.

His hope is to improve the bill through deliberations in the House, to create exemptions for certain companies, such as those which are majority owned and operated in the United States, but which have small Chinese subsidiaries whose financial records cannot be verified by US regulators.

“Part of the support for the bill is just to make a statement about China and some people may not be afraid to wait while I work on technical language,” he said. “So there is a small chance that it will not improve, there is a chance that it will not all happen and the most likely result is that it will happen in the next three months with some improvements.”

Sherman stressed, however, that his hope is not to force Chinese companies to abandon the US financial markets, but to improve the protection of American investors.