U.S. and Chinese regulatory officials are in talks to resolve a long-running dispute over the audit compliance of U.S.-registered Chinese companies, three people briefed on the matter told Reuters. The standoff, if not resolved, could see Chinese companies begin trading on the New York Stock Exchange. The US Public Company Accounting Oversight Board (PCAOB) denied an earlier Reuters report that a group from the agency had turned up in Beijing for talks. PCAOB authorities are expected to leave quarantine and start work within a week, one person said.
Talks between officials from the US Public Company Accounting Oversight Board (PCAOB) and their counterparts from the China Securities Regulatory Commission (CSRC) can be described as a “late stage” after China made concessions in recent months, the people said.
This week, the US Securities and Exchange Commission (SEC) added more than 80 companies, including e-commerce giant JD (NASDAQ:JD).com and China Petroleum (NYSE:SNP ) & Chemical Corp, to the list of companies facing possible expulsion.
If this visit goes as expected, the PCAOB is likely to send a larger team to China later this year to conduct on-site inspections of local auditors, the person said.
Authorities in China have long been reluctant to allow foreign regulators to inspect local accounting firms, citing national security concerns.
The sources declined to be identified due to the sensitivity of the topic. The PCAOB did not respond to requests for comment. The CSRC did not directly address Reuters inquiries about the arrival of PCAOB officials or the status of discussions.
But in a key concession, Chinese regulators last month proposed revising confidentiality rules for overseas listings and removing requirements that on-site inspections of overseas-listed Chinese companies be conducted primarily by domestic regulators. .
The PCAOB sent representatives to China for face-to-face negotiations earlier this year, the two people said.
Separate sources also said last month that a preliminary framework for audit oversight cooperation between the two countries has been formed. The dispute over audit oversight of New York-listed Chinese companies has been brewing for more than a decade, but came to a head last December when the SEC finalized rules to delist Chinese companies. under the Foreign Company Liability Act. He said there were 273 companies at risk, but did not name them.
As of Friday, the PCAOB has identified 128 Chinese companies at risk of delisting. The issue has been a major factor dragging down American Depository Receipts (ADRs) issued by Chinese companies, with the Nasdaq Golden Dragon China Index falling 57% in the past 12 months.
Goldman Sachs estimated in March that US institutional investors held about $200 billion worth of Chinese ADRs. In addition to concessions from Chinese regulators, there have been other signs that a deal is coming.
In late March, sources said the CSRC asked some of the country’s US-listed companies, including Alibaba Group Holding Ltd 9988.HK, Baidu Inc 9888.HK and JD.com, to prepare. for more audit disclosures. At the end of last month, Fang Xinghai, vice president of the CSRC, said that he hoped for an agreement in the near future.
News summary:
- US Regulatory Officials in China to Discuss Audit Compliance
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