US and Chinese regulators in talks for audit deal

Chinese and American flags fly in front of a U.S. company building in Beijing, China January 21, 2021. REUTERS/Tingshu Wang

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HONG KONG, May 6 (Reuters) – U.S. and Chinese regulators are in talks to resolve a long-running dispute over audit compliance of U.S.-listed Chinese companies, three people briefed on this told Reuters. topic.

The standoff, if left unresolved, could see Chinese companies kicked out of New York stock exchanges.

The US Public Enterprise Accounting Oversight Board (PCAOB) denied an earlier report by Reuters that a team from the agency had arrived in Beijing for interviews.

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This week, the US Securities and Exchange Commission (SEC) added more than 80 companies, including e-commerce giant JD.com (9618.HK) and China Petroleum & Chemical Corp (600028.SS) to the list. companies liable to be expelled. Read more

The talks between PCAOB officials and their counterparts at the China Securities Regulatory Commission (CSRC) can be described as a “late stage” after China made concessions in recent months, the sources said.

But a PCAOB spokesperson said: “Recent reports that PCAOB officials are currently in China, or that PCAOB officials were in China earlier this year conducting face-to-face negotiations, are false. The PCAOB has not sent any personnel to China since 2017.”

He said the board continued to engage with Chinese officials but “speculation on a final deal remains premature.” Accordingly, the PCAOB provides “for various scenarios”.

The CSRC did not respond directly on Friday to the status of the discussions. He referred Reuters to official statements from both sides but did not specify which ones.

The sources asked not to be identified due to the sensitivity of the issue.

Chinese authorities have long been reluctant to let foreign regulators inspect local accounting firms, citing national security concerns.

But in a key concession, Chinese regulators proposed last month to revise confidentiality rules for overseas listings and remove requirements that on-site inspections of Chinese companies listed overseas must be conducted primarily by national regulators. Read more

Sources told Reuters last month that a preliminary framework for audit oversight cooperation between the two countries had been formed. Read more

The row over audit oversight of Chinese companies listed in New York, which had been simmering for more than a decade, came to a head in December when the SEC finalized rules for delisting Chinese companies under the Securities Act. liability of foreign companies. He said there were 273 companies at risk but did not name them.

Last Friday, the PCAOB identified 128 Chinese companies at risk of delisting.

The issue has been a major factor that has weighed on US certificates of deposit (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 around $200 billion in Chinese ADRs.

Along with concessions from Chinese regulators, there are other signs that a deal is in sight.

In late March, sources said the CSRC had 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 to more audit disclosures. Late last month, Fang Xinghai, the CSRC’s vice chairman, said he expected a deal in the near future.

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

Our standards: The Thomson Reuters Trust Principles.

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