Beijing and Washington sign pact allowing regulators to vet US-listed Chinese companies

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Beijing and Washington signed a deal on Friday that will let US authorities inspect accounting firms in China and Hong Kong, marking a significant step toward resolving a dispute that threatened to bar Chinese corporations from the US stock exchanges, including Alibaba. 

For more than a decade, US regulators have wanted access to the audit records of Chinese companies that are listed on US exchanges, but Beijing has been reluctant to allow foreign regulators to check out its accounting firms due to national security concerns. 

The agreement, which comes as a relief to hundreds of Chinese businesses, investors, and US exchanges, signals a partial thawing in US-China relations amid tensions over Taiwan. If it goes through as planned, China will have the opportunity to continue accessing the deepest capital markets in the world.

Gary Gensler, the chair of the US Securities and Exchange Commission (SEC), warned that 200 Chinese companies would face a ban from US markets in the absence of this. Alibaba Group, JD.Com Inc., and NIO INC. were among entities previously named by the government as being in danger. 

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When announcing the agreement, US officials were circumspect, stressing that it was only the beginning and that their assessment of China’s compliance would depend on whether they could carry out their inspections without interference, as the agreement provides. 

The deal, according to the China Securities Regulatory Commission (CSRC), was beneficial to investors, businesses, and both countries in resolving the auditing issue.

In theory, the agreement appears to grant the PCAOB what it has long requested, including complete access to Chinese audit working papers with no redactions, the opportunity to interview employees of audit organisations in China, and complete control over which businesses it inspects. 

The selected companies were informed on Friday morning, according to US authorities, and they anticipate arriving in Hong Kong, where the inspections will take place, by mid-September.

(with inputs from agencies)

 



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