China changes audit secrecy rules in bid to stop US delistings

Beijing has revised its audit secrecy legal guidelines in a bid to cease round 270 Chinese firms from being delisted from US exchanges, in a major concession to strain from Washington.

The China Securities Regulatory Commission, Beijing’s prime monetary watchdog, stated on Saturday it might change confidentiality legal guidelines that forestall its overseas-listed firms from offering delicate monetary data to overseas regulators.

The CSRC stated that its current guidelines, which had been final up to date in 2009, had turn out to be outdated.

It is essentially the most important transfer but by Beijing to attempt to forestall Chinese firms in New York from being delisted in 2024. The Securities and Exchange Commission stated final month that China’s largest firms together with Baidu and Yum China had three years to offer detailed audit paperwork, prompting a pointy sell-off of their shares.

There are round 270 Chinese firms listed within the US with a mixed market capitalisation of over $2tn. The Nasdaq Golden Dragon China Index, which tracks blue-chip Chinese shares, has misplaced round half its worth within the final yr.

The uncommon coverage reversal by Beijing is anticipated to create a framework for US regulators to achieve entry to firm audit information and is the primary main rule change by China to permit disclosure of monetary data outdoors the nation. The Financial Times reported that regulators in Beijing had been in discussions over the proposals in March.

The newest guidelines, which have been put to public session till April 17, scrap a requirement that inspection of the monetary statements of overseas-listed Chinese firms should be carried out by primarily Chinese regulators.

The adjustments will facilitate “cross-border regulatory co-operation including joint inspections . . . for the protection of global investors”, based on the CSRC.

It follows months of negotiations between regulators in China and the US to resolve the long-simmering dispute over entry to audits.

Chinese authorities are trying to enhance investor confidence after a collection of regulatory crackdowns and calamitous share gross sales — equivalent to by Chinese ride-hailing app Didi — have rattled international markets.

The CSRC stated its chair Yi Huiman and SEC chair Gary Gensler had held three conferences since August over “audit oversight co-operation” and that there had been “positive progress”.

However, US regulators have dismissed the suggestion of an imminent deal that will halt the delistings countdown. Gensler stated final week that solely complete compliance with US audit inspections would enable Chinese firms to maintain buying and selling on New York markets.

Geopolitical stress between the US and China, together with most not too long ago over the Russian invasion of Ukraine, have led to fears {that a} compromise over audit entry is unlikely. A Hong Kong finance govt who has been near a number of the regulatory discussions stated delisting Chinese firms “is a weapon that the US has in this broader fight”. He added: “The US needs to be careful, if they keep pressuring China, they end up hurting themselves.”

Under guidelines issued in 2009, audit paperwork produced whereas itemizing Chinese firms abroad are forbidden from being shared with overseas entities. That clashes with the US Holding Foreign Companies Accountable Act, handed in 2020, which forces Chinese and Hong Kong firms to permit the US Public Company Accounting Oversight Board to look at their audits.

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