US regulators have arrived in Beijing in a bid to settle the long dispute over the auditing of Chinese companies listed on US stock exchanges, people familiar with the matter said.
If the auditing dispute is not resolved, some 248 Chinese firms with stock worth more than $1 trillion could be kicked off exchanges in New York.
The talks between officials from the US Public Company Accounting Oversight Board (PCAOB) and their counterparts at the China Securities Regulatory Commission (CSRC) can be described as “late stage” after China made concessions in recent months, the sources said.
The PCAOB group is expected to exit quarantine and start working next week, one source said.
If this visit proceeds as expected, the PCAOB is likely to send a bigger team to China later this year to conduct on-site inspections of local auditors, the person said.
The sources declined to be identified due to the sensitivity of the issue. The PCAOB and the CSRC did not respond to requests for comment.
Authorities in China have long been reluctant to let overseas regulators inspect local accounting firms, citing national security concerns.
As of Friday, the PCAOB has flagged 128 Chinese firms as at risk of being delisted. About 120 more could potentially be added to that number.
Under the US Holding Foreign Companies Accountable Act (HFCAA), which became law in 2020, the SEC must identify public companies that have retained a registered public accounting firm to issue an audit report where the firm has a branch or office located outside the US, and the PCAOB “has determined that it is unable to inspect or investigate completely because of a position taken by an authority in the foreign jurisdiction.”
• Reuters with additional editing by Jim Pollard
ALSO on AF: