Advertisement
US-listed Chinese stocks
China

China’s securities regulator signals willingness to work with US over audit inspections

  • The China Securities Regulatory Commission says it hopes to ‘create conditions’ to cooperate over an issue that threatens to delist US$1.3 trillion in shares
  • Beijing has refused to allow US regulators to go through its companies’ books, saying they contain state secrets

Reading Time:3 minutes
Why you can trust SCMP
5
Chinese firms risk being delisted from US exchanges. Photo: AP
Jodi Xu Klein

China’s securities regulator has said it will “create conditions” to cooperate with the United States over how it supervises the auditing of Chinese companies.

Advertisement
The pledge by the China Securities Regulatory Commission (CSRC), which came in a statement on Friday listing 10 priorities for the rest of the year, may be a sign it is willing to resolve a thorny issue that could see US$1.3 trillion worth of shares being delisted from US exchanges. However, no details were provided on how audits would be made more transparent.

The decades-long sparring between the two countries’ regulators culminated in 2019 with the US Holding Foreign Companies Accountable Act , which requires that foreign companies listed in the US comply with audit inspection rules under the auspices of the Public Company Accounting Oversight Board (PCAOB) or face being delisted within three years.

China has long denied US securities regulators the ability to inspect the financial audits of its US-listed companies, saying they contain state secrets. Chinese law bars financial institutions, including accounting, audit and legal firms, from providing any securities-related documents to foreign parties without permission.

Less known however, is that the preceding paragraph of Section 117 of the securities law mandates the CSRC to set up mechanisms for cross-border collaboration with overseas regulators, such as the US SEC and the PCAOB.

The CSRC has been actively searching for a mechanism acceptable to both China and the US to inspect the day-to-day operations of auditing firms, it said in a statement to the Post in June 2020.
Advertisement
Advertisement