China-US Economic Ties

SEC Official Sets November Deadline for Chinese Company Audits

 

The US SEC’s director of International Affairs YJ Fischer has warned that the US Public Company Accounting Oversight Board (PCAOB) needs to complete audit inspections of Chinese companies listed in the US before November 22 to avoid a 2023 delisting deadline, saying time is “quickly running out”.

Fischer added that “significant issues remain” in reaching a deal with China over the long-running dispute over Chinese companies’ compliance with regulations introduced nearly two decades ago.

In response, China’s securities regulator said on Wednesday that it was committed to reach an arrangement on the audit inspection issue that is in line with legal and regulatory requirements for both sides.

“We’ve always maintained that the audit inspection issue should be solved by cooperation on the basis of equality. Our attitude has always been positive and constructive,” a China Securities Regulatory Commission statement said.

Fischer added that Chinese authorities should consider immediately delisting from US exchanges a “subset of issuers” that it deems “too sensitive to comply” with US rules.

 

MARKET INSIGHTS: China Stocks Delisting From US: Everything You Need to Know

 

Didi shareholders recently voted to delist the company from the New York Stock Exchange.

Alibaba, JD.com, Baidu and most Chinese technology stocks took a hit in the wake of the comments, with Alibaba shedding almost 6% to close at $82.47, JD.com losing over 7% to close at $49.58, while Baidu fell 6.7%, closing at $115.73.

The NASDAQ Golden Dragon China Index shed some 6.59%.

Earlier in May, US regulators travelled to Beijing in a bid to settle the auditing dispute, people familiar with the matter said. Some 248 Chinese firms with stock worth more than $1 trillion face delisting if no deal is made.

But the SEC does not seem to be waiting for a deal. At around the same time officials were reportedly in Beijing, the SEC added over 80 firms to the list of companies targeted for removal from US exchanges.

Under the 2020 Holding Foreign Companies Accountable Act (HFCAA), the SEC is required to delist any company from any country that does not comply with audit requirements spelt out under the 2002 Sarbanes-Oxley Act, specifically, if 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 editing by Neal McGrath. This report has been updated to include a response from the China Securities Regulatory Commission

 

 

 

ALSO on AF:

JD.com, Pinduoduo Among 80 Firms Added to US Delisting Register

Chinese Firms Flock to Switzerland as US Delisting Risks Loom

China Plans Audit Concession Over US Delisting Threat – FT

China Stocks Delisting From US Puts $1.1 Trillion at Risk

 

Neal McGrath

Neal McGrath is a New York-based financial journalist. Neal started his career covering the Asia-Pacific region for the Economist Intelligence Unit, then joined Asian Business magazine. He's subsequently held a variety of editorial positions covering business, economics, finance and sustainability. Neal has lived and worked in Hong Kong, Singapore, Germany and the US.

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