China regulator seeks to avoid US delistings of Chinese firms

Hong Kong

CHINESE authorities are working with US counterparts to prevent Chinese companies being delisted from US stock exchanges, a Chinese regulatory official said on Thursday (Nov 25), as a lengthy dispute about auditing standards rumbles on.

US authorities are moving towards kicking foreign companies off American stock exchanges if their audits fail to meet US standards.

The Public Company Accounting Oversight Board (PCAOB) and US policy makers have long complained of a lack of access to audit working papers for US-listed Chinese companies.

Citing national security concerns, Chinese authorities have been reluctant to allow overseas regulators to inspect working papers from local accounting firms.

"We don't think that delisting of Chinese firms from the US market is a good thing either for the companies, for global investors or Chinese-US relations," Shen Bing, director general of the China Securities Regulatory Commission's (CSRC) department of international affairs, told a conference in Hong Kong.

"We are working very hard to resolve the auditing issue with US counterparts, the communication is currently smooth and open. There is a risk of delisting of these companies but we are working very hard to prevent it from happening," he added.

In December 2020, during the last weeks of his administration, President Donald Trump signed a law aimed at removing foreign companies from US exchanges if they failed to comply with American auditing standards for 3 years in a row.

A map on the organisation's website showed China as the only jurisdiction that denied the PCAOB "necessary access to conduct oversight".

Speaking at the same conference, Ashley Alder, CEO of Hong Kong's Securities and Futures Commission (SFC) said he feared Sino-US tensions could prevent a solution. "Sometimes politics can interrupt technical solutions that are sensible and achievable, and I pick up a degree of political attitude within the US establishment that is not necessarily conducive to a better outcome."

Hong Kong previously faced similar problems with access to mainland China audit working papers, but Alder said the SFC's relationship with the CSRC and a 2019 agreement had helped resolve these.

Hong Kong has benefitted from the Sino-US spat, as a string of US-listed Chinese companies have carried out secondary listings in the city in recent years, partly as a back up in case the companies are delisted from the Nasdaq or NYSE, say market participants.

The Hong Kong stock exchange, last week, confirmed it would proceed with rule changes to make it easier for overseas-listed Chinese companies to carry out secondary listings, and for companies to change a Hong Kong secondary listing to a primary one. REUTERS