SEC Action on Chinese Stock Dealings Urged

Suggesting that China may be skirting U.S. disclosure laws in stock sales of big government-owned companies, a senior House lawmaker has asked the government’s top securities regulator to take action.

Rep. Gerald Solomon (R-N.Y.), who heads the House Rules Committee, recently told the chairman of the Securities and Exchange Commission, Arthur Levitt, that the Chinese actions represent “a potential threat to our country.” He urged Levitt to take “appropriate” action, possibly including an investigation.

At the same time, Solomon and Sen. Lauch Faircloth (R-N.C.) are pushing House and Senate bills that would establish a new Office of National Security within the SEC to monitor foreign involvement in U.S. securities markets, financial institutions and pension funds.

The legislation doesn’t name any countries specifically, but China clearly was foremost in Solomon’s thinking. He proposed his bill last Wednesday--two days before Chinese President Jiang Zemin rang the opening bell at the New York Stock Exchange during his official U.S. visit.

Jiang’s trip, which included a summit with President Clinton, also leaned heavily on business concerns. The Chinese leader addressed stock exchange executives and CEOs of major brokerage firms, had meetings at private U.S. corporations and attended a state dinner hosted by Clinton with some of the biggest names in corporate America.

Solomon is to testify today at a hearing on the issue by the Senate Banking subcommittee on financial institutions.

SEC spokesman Christopher Ullman declined comment on Solomon’s letters to Levitt and the proposed legislation. Spokesmen at the Chinese Embassy didn’t immediately return a telephone call seeking comment.

In a letter dated Oct. 9, Solomon told Levitt that if the Chinese “succeed in illegally manipulating our capital markets, they will have introduced another element in their strategic offensive against our country. I encourage you to treat this issue as a potential threat to our country and take appropriate action.”

At issue was the sale to U.S. investors of a chunk of state-owned China Telecom. Its special shares began trading on the New York Stock Exchange on Oct. 22.