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Sunday, March 3, 2024

Here’s what happens if you own a share of a Chinese company that gets delisted

  • Rising tensions between the U.S. and China are increasing the chance that Chinese stocks listed in New York might be forced off exchanges there.
  • Removal of a stock from a major exchange does not necessarily mean investors cannot trade it.
  • But delisting brings greater investment — and now political — risk.

Traders work on the floor of the NYSE in New York.NYSE

BEIJING — For Americans looking to play the China growth story, investing in the country's U.S.-listed stocks now bears a political risk that could lead to delisting.

That means a Chinese company traded on an exchange like the Nasdaq would lose access to a broad pool of buyers, sellers and intermediaries. The centralization of these different market participants helps create what's called liquidity, which in turn allows investors to quickly turn their holdings into cash.

The development of the U.S. stock market over the decades also means companies listed on established exchanges are part of a system of regulation and institutional operations that can offer certain investor protections.

Once a stock is delisted, the company's shares can keep trading through a process known as "over-the-counter." But that means the stock is outside the system — of major financial institutions, deep liquidity and the ability for sellers to find a buyer quickly without losing money.

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