Key Points

  • China’s growth for 2021 appears strong, but February holds key developments that could impact this outlook.

  • Key developments include stock delistings, trade, and COVID-19.

  • China’s stock market is the best performing in the world so far this year and the country’s economic growth is driving the world’s recovery, so these developments can have far reaching impacts.

The Year of the Ox looks bullish for China with economists and analysts forecasting GDP growth of 8.1% and earnings growth of 18% for the MSCI China Index. But February holds key developments for China that could impact this outlook, including stock delistings, trade, and COVID-19.

Delistings

The NYSE may send valentines to China. The week of February 14 is the earliest that Chinese companies delisted by the NYSE on January 11 can be reviewed for re-listing, removing the trading ban.

At the end of December, the NYSE announced it would delist the U.S. traded ADRs that track the underlying stock listings of China Mobile Ltd., China Telecom Corp., and China Unicom Hong Kong Ltd. to comply with a November executive order by the Trump administration. This came after the Treasury’s Office of Foreign Assets Control designated these telecom subsidiaries subject to the bans on their parent companies identified as Chinese “military companies.” On January 4, the NYSE reversed this decision after talking with regulators. But, after pressure from the Trump administration, the exchange reversed their reversal and reinstated the delistings the following day. Subsequently, index providers including MSCI, FTSE Russell and S&P Dow Jones Indices started to remove companies affected by Trump’s order from their investment products in response to the trading ban. More Chinese companies may be subject to delisting.

How likely are re-listings? President Biden could rescind the executive order at any time. Alternatively, the Treasury, under the new leadership of Secretary Janet Yellen, could reinterpret the directive. Even if this top-down action is not forthcoming, the NYSE could reverse its decision yet again after further review. Delisting was not a term used in the original executive order or its interpretation by the U.S. Treasury. It is believed the intention of the order was to prompt investors to sell the shares of these firms, yet delisting results in the halt of all activity on these securities.