(Bloomberg) -- The House approved legislation that could lead to Chinese companies including behemoths like Alibaba Group Holding Ltd. and Baidu Inc. getting kicked off U.S. exchanges if Washington regulators aren’t allowed to review their financial audits.The legislation easily cleared the Senate in May and won bipartisan support in the House. Passage now sends the bill to President Donald Trump, who is expected to sign it.In addition to requiring companies to allow U.S. inspectors to review their financial audits, the bill -- originally introduced by Senators John Kennedy, a Louisiana Republican, and Chris Van Hollen, a Maryland Democrat -- requires firms to disclose whether they are under government control.“The current policy that allows Chinese firms to flout the rules that American companies follow is toxic,” Kennedy said in a statement to Bloomberg News on Saturday. “My colleagues on both sides of the aisle recognize that fact and that we have a solution at hand.”The bill represents a watershed moment in a long-running dispute between Washington and Beijing. At issue is China’s refusal to let the Public Company Accounting Oversight Board examine audits of firms whose shares trade in the U.S. The requirement for the inspections by the agency, which was created in the wake of the Enron Corp. accounting scandal, is meant to prevent fraud and wrongdoing that could wipe out shareholders.Protracted TalksRegulators in the two countries have been engaged in on-again, off-again negotiations amid the standoff for more than a decade. Over the years there have been moments of optimism that the two sides were closing in on a deal, but ultimately it always fell through -- with China citing strict confidentiality laws. More than 50 other foreign jurisdictions now permit the PCAOB inspections.Despite the inability of American inspectors to review audits of Chinese firms, they’ve been allowed to continue to trade in the U.S., as the dynamic has been profitable to American stock exchanges, investment banks and asset managers. According to the SEC, more than 150 of the country’s companies, with a combined value of $1.2 trillion, traded on U.S. exchanges as of 2019 and there have been a spate of initial public offerings this year.Major companies such as Vanguard Group Inc., the New York Stock Exchange, and Nasdaq have all expressed concern that the trend could reverse, with a crackdown causing Chinese companies to move their listings to Hong Kong or countries where investor protections are weaker than in the U.S. American investors would still be able to purchase the stock.Alibaba CFO Maggie Wu said during a May 22 earnings call that the company “will endeavor to comply” with legislation that seeks to bring transparency to investors buying stocks on U.S. exchanges. Her comments were directed specifically at the Kennedy-Van Hollen legislation, which at that point had just passed the Senate.The bill would prohibit foreign companies from trading in the U.S. if PCAOB inspectors aren’t allowed to review their auditors’ work for three consecutive years. The businesses would also have to disclose whether they’re controlled by China’s Communist Party, or any other foreign government.SEC BackingJay Clayton, the outgoing chairman of the Securities and Exchange Commission, supports the legislation.“There is broad bipartisan congressional support, as well as support across the federal financial regulators, for bringing this significant asymmetric treatment to a conclusion on a time frame that allows investors to adjust their holdings as they believe appropriate,” Clayton said in a statement Wednesday.The agency has been pushing ahead with writing a rule to tackle the same issue, which would lead to the de-listing of companies for not complying with U.S. auditing rules, Bloomberg News reported last month. The effort is in response to recommendations released earlier this year by top Trump-appointed financial officials including Clayton and Treasury Secretary Steven Mnuchin.Fang Xinghai, the vice chairman of the China Securities Regulatory Commission, last month expressed optimism that the clash could be resolved with an incoming Biden administration. “It’s not an intractable problem,” Fang said, adding that it’s important to ensure that Chinese companies have access to international capital markets.(Updates to reflect passage by House.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.