Bill Summary
This legislation, named the "China Risk Reporting Act," aims to amend the Securities Exchange Act of 1934 to require companies to disclose any financial risks related to investing in China. It is the sense of Congress that investing in China poses unique risks that investors should be aware of. Therefore, the amendment would add a new subsection to the Act, requiring companies to include in their annual report a description of their supply chain reliance and operations in China, as well as a narrative description of their China risk. If a company identifies a material China risk, they must also include a description of the actions they have taken or will take to minimize it. This amendment also clarifies that companies are not required to disclose their assessment of the likelihood of a China risk occurring or provide a third-party assessment. The terms "China risk," "covered event," "covered foreign market," "mainland China," "operations," and "PRC military action against Taiwan" are defined in this legislation. Additionally, companies must also disclose this information at the time of registration. The effective date of this amendment is 180 days after its enactment.
Possible Impacts
1. This legislation could affect investors who are considering investing in China. The required annual disclosures will provide them with information about potential risks and allow them to make more informed decisions about their investments.
2. Companies with operations in China may be affected by this legislation. They will be required to provide detailed information about their exposure to potential risks in China, which could impact their business operations and strategies.
3. The legislation could also affect the relationship between the United States and China. The disclosure requirements in the bill may lead to economic tensions between the two countries, especially if a "covered event" occurs.
[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 7757 Introduced in House (IH)]
<DOC>
118th CONGRESS
2d Session
H. R. 7757
To amend the Securities Exchange Act of 1934 to require disclosures
with respect to certain financial risks relating to the People's
Republic of China, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
March 20, 2024
Mr. Sherman (for himself and Mrs. Spartz) introduced the following
bill; which was referred to the Committee on Financial Services
_______________________________________________________________________
A BILL
To amend the Securities Exchange Act of 1934 to require disclosures
with respect to certain financial risks relating to the People's
Republic of China, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``China Risk Reporting Act''.
SEC. 2. DISCLOSURE WITH RESPECT TO CERTAIN FINANCIAL RISKS RELATING TO
THE PEOPLE'S REPUBLIC OF CHINA.
(a) Sense of Congress.--It is the sense of Congress that investing
in China poses unique risks that investors should carefully consider.
(b) Annual Disclosures.--Section 13 of the Securities Exchange Act
of 1934 (15 U.S.C. 78m) is amended by adding at the end the following:
``(t) Disclosure With Respect to Certain Financial Risks Relating
to the People's Republic of China.--
``(1) In general.--Each issuer required to file an annual
report under subsection (a) shall include in such report--
``(A) with respect to each covered foreign market,
a description (including quantification, if possible)
of--
``(i) the degree to which each supply chain
of such issuer relies upon or is exposed to the
covered foreign market; and
``(ii) the operations of such issuer in the
covered foreign market;
``(B) a narrative description of the issuer's China
risk; and
``(C) if the issuer identifies a material China
risk, a narrative description with respect to each
China risk identified by the issuer of--
``(i) the actions the issuer has taken or
will take to minimize that China risk; and
``(ii) the additional actions the issuer
may take to minimize that China risk if a
covered event occurs.
``(2) Rule of construction.--Nothing in this subsection
shall be construed to require an issuer to--
``(A) disclose the assessment of such issuer as to
the likelihood that a covered event or any China risk
will occur; or
``(B) provide any third-party assessment of such
likelihood.
``(3) Definitions.--In this subsection:
``(A) China risk.--The term `China risk' means an
issuer's exposure to material financial consequences
caused by the Chinese Communist Party, the Government
of the People's Republic of China, or firms or other
entities operating in the People's Republic of China
stemming from reasonably likely, imminent, or ongoing
factors, including--
``(i) consequences for the operations of
the issuer--
``(I) in a covered foreign market;
and
``(II) caused by disruptions to
supply chains, including supply chains
for--
``(aa) goods or services
originating in a covered
foreign market; and
``(bb) goods transported
through or over the East China
Sea or South China Sea;
``(ii) devaluation, seizure, expropriation,
denial of access, or nationalization of assets,
including intellectual property, of the issuer
in a covered foreign market;
``(iii) imperfect rule of law, unequal or
imperfect enforcement of intellectual property
rights, or biased judicial proceedings;
``(iv) with respect to any equity
investments the issuer has within a covered
foreign market, impediments to exercising full
voting rights of American or non-Chinese
shareholders or any firm in which the issuer
has an equity investment taking actions against
the interests of the firm's shareholders in
favor of the interests of the Chinese Communist
Party or the Government of the People's
Republic of China; and
``(v) other material financial impact on
the operations of the issuer caused by the
Chinese Communist Party, the Government of the
People's Republic of China, or firms or other
entities operating in the People's Republic of
China.
``(B) Covered event.--The term `covered event'--
``(i) means a significant disruption to the
economic relations between the United States
and the People's Republic of China, including--
``(I) a partial or full trade
embargo of the People's Republic of
China by the United States (or vice
versa);
``(II) trade or financial sanctions
imposed on the People's Republic of
China by the United States (or vice
versa); and
``(III) the United States revoking
permanent normal trade relations with
the People's Republic of China (or vice
versa); and
``(ii) includes disruptions resulting from
PRC military action against Taiwan.
``(C) Covered foreign market.--The term `covered
foreign market' means mainland China, the Hong Kong
special administrative region, the Macau special
administrative region, Taiwan, Japan, Mongolia, the
Democratic People's Republic of Korea, and the Republic
of Korea.
``(D) Mainland china.--The term `mainland China'
means the People's Republic of China, excluding the
Hong Kong special administrative region and the Macau
special administrative region.
``(E) Operations.--The term `operations' may
include, with respect to an issuer required to file an
annual report under subsection (a), the assets,
personnel, sales and revenue, liabilities, technology,
intellectual property, and other notable ties or
activities of such issuer.
``(F) PRC military action against taiwan.--The term
`PRC military action against Taiwan'--
``(i) means a campaign of armed aggression
by the People's Republic of China against the
Government of Taiwan (or the territories under
its control); and
``(ii) includes--
``(I) a firepower strike campaign;
``(II) an island landing campaign;
and
``(III) a full or partial blockade
(by sea or air).''.
(c) Disclosure at Time of Registration.--Section 12(b) of the
Securities Exchange Act of 1934 (15 U.S.C. 78l(b)) is amended by adding
at the end the following:
``(4) The information described under section 13(t)(1).''.
(d) Effective Date.--The amendments made by this section shall take
effect on the date that is 180 days after the date of the enactment of
this section.
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