China’s securities watchdog says it’s been in regular talks with US regulators over the ongoing audit stand-off and expects a deal soon, a senior Chinese regulatory official said on Thursday.
Fang Xinghai, vice-chairman of the China Securities Regulatory Commission (CSRC) made the comments during a panel discussion at the annual Boao Asia Forum.
“Currently, we basically conduct negotiations via video link every two weeks, to finalise details,” Fang told a panel discussion.
“I’m very confident that we will reach an agreement in the near future, so that PCAOB could conduct checks on Chinese accounting firms in China in a reasonable way. This uncertainty will be removed soon, and this will be good news for Chinese stocks listed overseas.”
The 2002 Sarbanes-Oxley Act requires all companies listed on US exchanges to comply with specific accounting rules. Since 2002, every country has either complied with the rules or its companies have voluntarily delisted. China has has done neither.
After decades of negotiations with no result, US Congress passed the Holding Foreign Companies Act in 2021, which specifically requires the SEC to delist any company that does not cooperate with Public Companies Accounting Oversight Board (PCAOB) audit inspection requests. Previously, the SEC could choose to act or not.
Now, the SEC is legally required to delist any company that does not comply with audit requests for three consecutive years.
On April 2, China published revised draft confidentiality rules that could give US regulators access to audit working papers it has been seeking for decades.
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There were previous media reports suggesting progress in the US-China talks, but US securities and audit regulators had pushed back on speculation of an imminent deal with China.
In March, the US Securities and Exchange Commission (SEC) identified 11 US-traded Chinese companies, including Baidu Inc and Yum China, that face delisting risks, and the list is growing longer.
Since a change of chairmen at both the SEC and PCAOB, “negotiations between the CSRC-led Chinese negotiation team and them have been progressing very smoothly,” Fang said on Thursday.
He reiterated that “the CSRC’s attitude is to support firms to list overseas, and support firms to choose markets where they want to list.”
- Reuters with additional editing by Sean O’Meara