(Yicai) Aug. 25 -- Cnano Technology, a Chinese carbon nanotube materials supplier, said it will sell a controlling stake in a subsidiary running its US unit to Aether Materials for USD25.5 million to comply with the One Big Beautiful Bill Act, ensuring the continued operation of its North American business.

Cnano plans to sell a 51 percent stake in C-Nano Technology in phases to ensure that Cnano Technology USA meets the non-prohibited foreign entities criteria under the One Big Beautiful Bill Act, specifically that a single Chinese entity does not hold more than 25 percent of Cnano USA, either directly or indirectly, or that multiple Chinese entities do not collectively hold more than 40 percent, the Zhenjiang-based parent firm announced yesterday.

In the first phase, Cnano will transfer 51 percent of its equity in C-Nano to Aether, with the unit no longer included in its consolidated financial report after the transaction is completed, it said, without providing specific reduction measures. Aether is controlled by Zheng Tao, who is one of the controlling shareholders and actual controllers of the parent company.

The One Big Beautiful Bill Act enacted in July last year supplements and refines the criteria for identifying Non-PFEs under the US Inflation Reduction Act. Under the new rules, downstream customers in North America that purchase products supplied by firms classified as a PFE will be ineligible to apply for advanced manufacturing tax credits under the IRA, which may significantly weaken the core competitiveness of companies labeled as PFEs in the market.

Cnano USA was classified as a PFE because Cnano indirectly holds 100 percent equity in the firm through C-Nano.

Not making the adjustment may cause Cnano to lose key customers in the North American market, face idle production capacity, and log losses, the company noted. The overall operational costs at Cnano USA’s production facility are also too high, making it commercially unfeasible to supply products from the North American base to other markets, it said.

In addition, if products are manufactured at Chinese factories and directly exported to the North American market, they would face high import tariffs, Cnano pointed out. Domestic entities are also classified as PFEs, meaning downstream North American customers buying these products would still be ineligible for tax credits, so the products would gradually lose their market competitiveness, it stressed.

Cnano’s net profit jumped 15 percent to CNY135 million (USD20.1 million) in the first half of this year from a year earlier, while its revenue rose 11 percent to CNY728 million (USD110 million), according to the company.

Cnano is a high-tech company focusing on the research and development, production, and sales of nanotube carbon materials and related products. Its main products include carbon nanotube powder, carbon nanotube conductive paste, graphene composite conductive paste, and carbon nanotube conductive masterbatch.

Shares of Cnano [SHA: 688116] ended 2 percent higher at CNY32.30 (USD4.81) each today. The broader Shanghai stock market climbed 0.2 percent.

Editor: Martin Kadiev