Chinese authorities are working to revise the rules of confidentiality in relation to offshore listings, which marks a significant step forward in resolving disputes in the US-China cooperation on audit supervision.
The proposed revision signals Beijing’s latest efforts to settle the revision dispute with the US, which could result in the delisting of 270 Chinese companies from US stock exchanges in 2024.
As a result, shares of U.S. listed Chinese companies rose on Monday before opening. Alibaba (NYSE 🙂 has risen about 5% while Pinduoduo (NASDAQ 🙂 and JD.com (NASDAQ 🙂 are trading 8.5% and 5.7% higher, respectively.
The new proposal removes the requirement that on-site inspection of offshore listings should be performed primarily by Chinese regulators. The move could significantly help resolve the audit dispute after U.S. regulators demanded full access to audit papers for Chinese companies listed abroad.
The proposal is expected to support “cross-border regulatory cooperation, including joint inspections, that will help protect the interests of global investors,” the China Securities Regulatory Commission (CSRC) said.
Chinese and U.S. regulators met several times, with both sides showing determination in resolving the dispute, the CSRC added.
The move primarily indicates China’s desire to ensure its companies remain listed in the US, but US regulators have rejected rumors of an impending audit agreement with China.
Last month, the US Securities and Exchange Commission (SEC) named 11 U.S. listed Chinese companies that could be delisted, including Baidu (NASDAQ 🙂 and Yum (NYSE :), among others.
The revised confidentiality rules emphasize that Chinese companies are responsible for the information security of offshore listings, minimizing the chances of confidential information being accommodated in the auditor’s working papers, the Chinese regulator said.
The draft rules now include procedural requirements, which require Chinese companies to provide a written explanation when sharing sensitive information with intermediaries, including insurers and auditors. However, the CSRC expects that these occasions will happen very rarely.
The Commission also said that the draft rules would provide clear guidelines to help companies protect state secrets and thus ensure orderly securities issues and listings.
By Senad Karaahmetovic