Reports that the White House may be looking to clamp down on capital flows into China roiled Wall Street on Friday, as investors with exposure to Chinese firms struggled to make sense of what such moves would entail.

Trump administration officials were having preliminary discussions on ways to limit Chinese companies from trading on U.S. exchanges and restrict portfolio inflows into China, according to Bloomberg News, citing people familiar with the matter.

This comes at a sensitive time for U.S.-China relations, with governments of both countries seeking a resolution to their longstanding trade dispute. CNBC reported that a Chinese delegation, helmed by Vice Premier Liu He, would arrive in the U.S. capital in Oct. 10-11 for higher-level talks.

U.S. equity markets ended lower on Friday, with the S&P 500 SPX, +1.59% and the Dow Jones Industrial Average DJIA, +1.33% posting weekly losses.

Here’s what investors should keep in mind if a broader crackdown on U.S. capital flows into China makes further headway:

Exchanges

U.S.-listed Chinese companies have already been under pressure over complaints that the rigor of financial statements from Chinese companies were not at the same standard of U.S. firms, exposing American investors to potential corporate governance problems and outright fraud.

Two bipartisan bills have been introduced in Congress aimed at pushing U.S.-listed Chinese firms to comply with auditing rules in the U.S. and if those companies failed to submit to regulatory oversight, they would face delisting.

Beijing has long pushed back on moves to allow overseas regulators to examine the audit work of domestic accounting firms.

Chinese companies have a large presence in U.S. capital markets. A total of 156 Chinese companies were listed in the U.S., commanding a market capitalization of around $1.2 trillion, as of February 2019.

See: Regulators revive China audit dispute, but miss prime opportunity to fully explain why

Chinese internet giants listed in the U.S. were hit hard by Friday’s report. Alibaba’s BABA, +0.50% stock closed down around 5.2%, and Baidu’s BIDU, +0.02% shares ended lower by 3.7% in Friday trading.

The KraneShares CSI China Internet Exchange-traded fund KWEB, -0.07% fell 3.8%, while the broader iShares MSCI China ETF MCHI, -0.40% finished down 2.2%, FactSet data shows.

Read: Huya, iQiyi, Nio, Luckin Coffee, Baidu and Pinduoduo move sharply lower on listing report

Decoupling

The breakout of trade tensions between U.S. and China about two years ago has led some in Washington to push for a broader decoupling of financial ties between the two countries, drawing Chinese stocks listed in the U.S. into the cross-sights of more hawkish members of Congress.

Analysts say this pressure may have led some Chinese companies to look for other listing venues. Alibaba announced it would hold its second listing in Hong Kong. Those plans, however, were postponed after the Asian financial center was rocked by protests in the past few months.

Sen. Marco Rubio has been particularly vocal on the need to monitor connections between Wall Street and China.

In a June letter, Rubio asked MSCI, the global securities index provider, what they were doing to ensure that U.S. investors were not funneling money into Chinese state organs, or businesses linked to Beijing.

“We can no longer allow China’s authoritarian government to reap the rewards of American and international capital markets while Chinese companies avoid financial disclosure and basic transparency, and place US investors and pensioners at risk,” Rubio told MSCI’s chairman and chief executive Henry Fernandez in a letter dated June 12.

Later in August, he called for the Federal Retirement Thrift Investment Board, a pension fund for federal government employees, to avoid benchmarking its funds to the MSCI All Country World ex-U.S. Investable Market Index.

Rubio said the index contained companies partly owned by Beijing like Hikvision 002415, -1.95% , which have been accused of being complicit in human rights abuses in Xinjiang.

Rubio has let the White House know what he is doing with regard to his efforts on China and U.S. capital markets, a spokesman for the senator told MarketWatch. But the senator didn’t coordinate on the actions reported by Bloomberg, the spokesman said.

It isn’t clear, however, if the U.S. government can pressure global index providers not to include shares from Chinese firms.

Check out: ‘Socially responsible’ investors may have unwittingly backed police-state surveillance in China

Benchmarking

Patrick Chovanec of Silvercrest Asset Management worried that if U.S. investors couldn’t include Chinese stocks and bonds into their portfolios, they could risk underperforming their benchmarked indexes. That’s become a pertinent issue as assets linked to Chinese companies now occupy a bigger weighting in global indexes, in line with China’s growing economic and financial heft.

In May, MSCI quadrupled the weight of Chinese stocks listed in domestic bourses in the MSCI Emerging Markets EEM, +0.09% to 3.3%.

Bloomberg Barclays and JP Morgan have both recently added Chinese government bonds and debt issued by the country’s policy banks to their indexes, even as the FTSE Russell declined to do so on Thursday.