China’s securities regulator says it will carry out China-US audit deal By Reuters
BEIJING/SHANGHAI (Reuters) – China will implement an audit agreement with the United States announced last week and strengthen communication with foreign investors, a senior Chinese official with the securities regulator said on Friday.
China will expand mutual access between the mainland and Hong Kong, and strengthen the city’s role as a global listing site, Fang Xinghai, vice-chairman of the China Securities Regulatory Commission (CSRC), said at a forum.
The agreement between China and the United States, announced Friday last week, will allow US regulators to inspect accounting firms in mainland China and Hong Kong, potentially ending a long-running dispute that has threatened to banish more than 200 Chinese firms from US exchanges.
Previously, China had been reluctant to grant such access, citing national security concerns.
“We will well implement the China-US cooperation agreement on cross-border audit supervision, and continue to strengthen communication with foreign institutional investors,” Fang said.
Under US law, Chinese companies that do not comply with US audit rules will be banned from trading on US stock exchanges by 2024.
US regulators chose e-commerce majors Ali Baba (NYSE:) Group Holding Ltd and JD (NASDAQ:). com Inc, among the Chinese companies listed in the United States, to scrutinize the audit starting this month under the agreement, sources told Reuters.
Meanwhile, legal experts and China watchers warn of the potential for disagreement between the two sides over how to interpret and implement the agreement.
“My instinct is that now that China has indicated that it wants to avoid mass delisting, things will eventually work out,” said Drew Bernstein, co-chair of Marcum Asia CPAs LLP.
But expect some bumps in the road and barrels of oil in the middle of the night burning before you get there.
Fang said the CSRC would work with Hong Kong’s financial regulators to expand the China-Hong Kong stock link scheme, by including more eligible shares.
“This will help Hong Kong to attract more companies elsewhere to join the list in Hong Kong,” Fang said.
Already, a growing number of Chinese companies listed in the United States have made secondary or primary listings in Hong Kong, to mitigate the impact of potential delistings in the United States.
Fang also said that China is considering setting up a trading desk for yuan-denominated securities in the southern part of the Stock Connect, which is aimed at mainland investors.
In addition, China has supported the issuance of Chinese government bond futures in Hong Kong, he said.
Hong Kong Chief Executive John Lee hailed the measures as “important milestones,” saying in a statement that they will attract more listings in Hong Kong and provide risk management tools for bond investors.
Hong Kong Financial Secretary Paul Chan said in the same statement that the measures will enhance Hong Kong’s position as an international financial center and global hub.