US and Chinese language regulators in talks over audit deal

Chinese language and American flags flutter outdoors the constructing of an American firm in Beijing, China Jan. 21, 2021. REUTERS/Tingshu Wang

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HONG KONG, Could 6 (Reuters) – US and Chinese language regulatory officers are in talks to settle a long-running dispute over compliance with controls over US-listed Chinese language corporations, three individuals briefed on the matter informed Reuters.

The impasse, if not resolved, might result in Chinese language corporations kicking off New York inventory markets.

The US Public Firm Accounting Oversight Board (PCAOB) denied an earlier Reuters report {that a} workforce from the company had arrived in Beijing for talks.

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This week, the U.S. Securities and Change Fee (SEC) added greater than 80 corporations, together with e-commerce big JD.com (9618.HK) and China Petroleum & Chemical Corp (600028.SS) to its record of corporations that may very well be evicted . learn extra

Talks between PCAOB officers and their colleagues on the China Securities Regulatory Fee (CSRC) may very well be described as a “late stage” after China made concessions in current months, the individuals mentioned.

However a PCAOB spokesperson mentioned: “Latest stories that PCAOB officers are at the moment in China, or that PCAOB officers had been in China earlier this 12 months to conduct face-to-face negotiations, are unfaithful. The PCAOB has not despatched personnel to China since 2017. . .”

He mentioned the board stays in talks with the Chinese language authorities, however “hypothesis a couple of last deal stays untimely”. Consequently, the PCAOB plans “for various eventualities”.

The CSRC didn’t instantly touch upon the standing of the talks on Friday. It referred Reuters to official statements from each side, however didn’t specify which statements.

As a result of sensitivity of the matter, the sources have requested to not be recognized.

Authorities in China have lengthy been reluctant to let overseas regulators examine native audit companies, citing nationwide safety issues.

However in a serious concession, Chinese language regulators final month proposed revising confidentiality guidelines for offshore listings and eradicating necessities that on-site inspections of foreign-listed Chinese language corporations be performed primarily by home regulators. learn extra

Sources informed Reuters final month {that a} preliminary framework for audit oversight cooperation has been fashioned between the 2 international locations. learn extra

The squabble over the oversight of New York-listed Chinese language corporations, which had been happening for greater than a decade, got here to a head in December when the SEC finalized its guidelines for delisting Chinese language corporations below the regulation. the Holding International Firms Accountable Act. It mentioned 273 corporations had been in danger however didn’t title them.

On Friday, the PCAOB recognized 128 Chinese language corporations liable to being delisted.

The difficulty was a significant factor boosting U.S. depositary receipts for shares (ADRs) issued by Chinese language corporations, with the Nasdaq Golden Dragon China Index falling 57% prior to now 12 months.

Goldman Sachs estimated in March that US institutional traders held about $200 billion in Chinese language ADRs.

Along with concessions from Chinese language regulators, there are different indicators {that a} deal is on the way in which.

In late March, sources mentioned the CSRC has requested among the US-listed corporations, together with Alibaba Group Holding Ltd (9988.HK), Baidu Inc (9888.HK) and JD.com, to organize for extra audit disclosures. Late final month, Fang Xinghai, the vice chairman of the CSRC, mentioned he expects a deal to be reached within the close to future.

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Reporting by Xie Yu; Extra protection by Katanga Johnson in Washington, Selena Li in Hong Kong and Jing Xu in Beijing; Enhancing by Edwina Gibbs and William Mallard

Our Requirements: The Thomson Reuters Belief Rules.

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