U.S., Chinese regulators in talks for audit deal

Chinese language and U.S. flags flutter exterior the constructing of an American firm in Beijing, China January 21, 2021. REUTERS/Tingshu Wang

HONG KONG, Might 6 (Reuters) – U.S. and Chinese language regulatory officers are in talks to settle a long-running dispute over the auditing compliance of U.S.-listed Chinese language companies, three folks briefed on the matter informed Reuters.

The standoff, if not resolved, might see Chinese language companies kicked off New York bourses.

The U.S. Public Firm Accounting Oversight Board (PCAOB) denied an earlier Reuters report that mentioned a group from the company had arrived in Beijing for talks.

This week the U.S. Securities and Trade Fee (SEC) added over 80 companies, together with e-commerce big JD.com (9618.HK) and China Petroleum & Chemical Corp (600028.SS) to the listing of firms dealing with doable expulsion. learn extra

The talks between officers from the PCAOB and their counterparts on the China Securities Regulatory Fee (CSRC) could be described as “late stage” after China made concessions in latest months, the folks mentioned.

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

He mentioned the board continues to interact with the Chinese language authorities however “hypothesis a couple of ultimate settlement stays untimely.” Because of this, the PCAOB is planning “for varied eventualities”.

The CSRC on Friday didn’t reply straight on the standing of discussions. It referred Reuters to official statements from either side however didn’t specify which statements.

The sources requested to not be recognized because of the sensitivity of the difficulty.

Authorities in China have lengthy been reluctant to let abroad regulators examine native accounting companies, citing nationwide safety considerations.

However in a key concession, Chinese language regulators final month proposed revising confidentiality guidelines for offshore listings and scrapping necessities that on-site inspections of overseas-listed Chinese language companies be carried out primarily by home regulators. learn extra

Sources informed Reuters final month {that a} preliminary framework for audit supervision cooperation between the 2 nations has been shaped. learn extra

The spat over audit oversight of New York-listed Chinese language firms, simmering for greater than a decade, got here to a head in December when the SEC finalised guidelines to delist Chinese language firms beneath the Holding International Corporations Accountable Act. It mentioned there have been 273 firms in danger however didn’t identify them.

As of Friday, the PCAOB has recognized 128 Chinese language companies as vulnerable to being delisted.

The difficulty has been a significant component dragging on American depositary receipts (ADRs) issued by Chinese language companies, with the Nasdaq Golden Dragon China Index tumbling 57% over the previous 12 months.

Goldman Sachs estimated in March that U.S. institutional buyers held round $200 billion value of Chinese language ADRs.

Along with the concessions by Chinese language regulators, there have been different indicators {that a} deal is within the offing.

In late March, sources mentioned the CSRC requested a number of the nation’s U.S.-listed companies, together with Alibaba Group Holding Ltd (9988.HK), Baidu Inc (9888.HK) and JD.com, to arrange for extra audit disclosures. Late final month, Fang Xinghai, the CSRC’s vice chairman mentioned he anticipated a deal within the close to future.

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

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