China’s securities watchdog is soon expecting an audit agreement with US regulators
China’s securities watchdog is soon expecting an audit agreement with US regulators

China’s securities watchdog is soon expecting an audit agreement with US regulators

The flags of China and the United States are seen printed on paper in this illustration taken January 27, 2022. REUTERS / Dado Ruvic / Illustration

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BOAO, China, April 22 (Reuters) – China’s securities firm is in regular talks with U.S. regulators on audit cooperation and expects an agreement soon, a Chinese regulatory official said Thursday about a dispute that could lead to delistings of U.S. listed Chinese firms.

The comments of Fang Xinghai, Vice President of the China Securities Regulatory Commission (CSRC), represent the latest gesture from Beijing that it is willing to resolve the long-running dispute with Washington.

“I am very confident that we will reach an agreement in the near future so that PCAOB can carry out audits of Chinese auditing firms in China in a reasonable manner,” Fang said at the annual Boao Asia Forum, referring to the Public Company Accounting Oversight Board , the U.S. Audit Office.

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“This uncertainty will soon be removed and this will be good news for Chinese equities listed abroad,” Fang added.

However, investors continued to dump Chinese technology stocks on Friday, following news that the US Securities and Exchange Commission (SEC) had identified another 17 US listed companies, mostly Chinese companies, including Li Auto Inc, Zhihu Inc and (SOHU.O)which faces a delisting risk under U.S. law.

This adds to a list of 11 companies identified by the SEC in March, which includes Baidu Inc and Yum China (YUM.N).

“I do not think China and the United States can reach an agreement right now,” said Yuan Yuwei, hedge fund manager at Water Wisdom Asset Management, citing geopolitical tensions.

There are also growing concerns among investors about the cost of China’s zero-COVID policy and severe lockdowns, he added.

Hong Kong’s Hang Seng Tech Index (.HSTECH) fell as much as 3.6% on Friday morning while the Nasdaq Golden Dragon China Index (.HXC) fell 5.2% overnight.

Market apathy toward Fang’s remarks “reflects investor fatigue amid protracted Sino-US frictions,” said Zhang Yingbiao, fund manager at Shenzhen Dragon Huijin Fund Management Co. , so they are on the sidelines. “

The PCAOB has requested full access to audit papers for Chinese companies listed in New York.

But the request has so far been rejected by China for national security reasons – a standoff that could lead to about 270 companies being forced to delist US exchanges by 2024.

On April 2, China released draft confidentiality rules that would potentially give U.S. regulators access to Chinese companies’ working papers through joint inspections or other forms of regulatory cooperation.

Meanwhile, the rules require Chinese companies to protect state secrets. Read more

“Negotiations between the CSRC-led Chinese negotiating team and them have been very smooth,” Fang said on Thursday.

He reiterated that “CSRC’s position is to support companies to list abroad, and support companies to choose markets where they want to list”.

There were previous media reports indicating progress in the US-China negotiations, but US securities and audit authorities had pushed back on speculation about an impending agreement with China.

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Reporting by Kevin Yao and Samuel Shen; Writing by Samuel Shen; Edited by Toby Chopra, Alison Williams and Himani Sarkar

Our standards: Thomson Reuters trust principles.

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