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U.S., Chinese regulators in talks for audit deal - sources

Stock Markets May 07, 2022 02:05AM ET
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© Reuters. FILE PHOTO: Chinese and U.S. flags flutter outside the building of an American company in Beijing, China January 21, 2021. REUTERS/Tingshu Wang

By Xie Yu

HONG KONG (Reuters) - U.S. and Chinese regulatory officials are in talks to settle a long-running dispute over the auditing compliance of U.S.-listed Chinese firms, three people briefed on the matter told Reuters.

The standoff, if not resolved, could see Chinese firms kicked off New York bourses.

The U.S. Public Company Accounting Oversight Board (PCAOB) denied an earlier Reuters report that said a team from the agency had arrived in Beijing for talks.

This week the U.S. Securities and Exchange Commission (SEC) added over 80 firms, including e-commerce giant JD (NASDAQ:JD).com and China Petroleum (NYSE:SNP) & Chemical Corp to the list of companies facing possible expulsion.

The talks between officials from the PCAOB and their counterparts at the China Securities Regulatory Commission (CSRC) can be described as "late stage" after China made concessions in recent months, the people said.

But a PCAOB spokesperson said, "Recent reports that PCAOB officials are currently in China, or that PCAOB officials were in China earlier this year to conduct face-to-face negotiations, are untrue. The PCAOB has not sent any personnel to China since 2017."

He said the board continues to engage with the Chinese authorities but "speculation about a final agreement remains premature." As a result, the PCAOB is planning "for various scenarios".

The CSRC on Friday did not respond directly on the status of discussions. It referred Reuters to official statements from both sides but did not specify which statements.

The sources asked not to be identified due to the sensitivity of the issue.

Authorities in China have long been reluctant to let overseas regulators inspect local accounting firms, citing national security concerns.

But in a key concession, Chinese regulators last month proposed revising confidentiality rules for offshore listings and scrapping requirements that on-site inspections of overseas-listed Chinese firms be conducted mainly by domestic regulators.

Sources told Reuters last month that a preliminary framework for audit supervision cooperation between the two countries has been formed.

The spat over audit oversight of New York-listed Chinese companies, simmering for more than a decade, came to a head in December when the SEC finalised rules to delist Chinese companies under the Holding Foreign Companies Accountable Act. It said there were 273 companies at risk but did not name them.

As of Friday, the PCAOB has identified 128 Chinese firms as at risk of being delisted.

The issue has been a major factor dragging on American depositary receipts (ADRs) issued by Chinese firms, with the Nasdaq Golden Dragon China Index tumbling 57% over the past 12 months.

Goldman Sachs (NYSE:GS) estimated in March that U.S. institutional investors held around $200 billion worth of Chinese ADRs.

In addition to the concessions by Chinese regulators, there have been other signs that a deal is in the offing.

In late March, sources said the CSRC asked some of the country's U.S.-listed firms, including Alibaba (NYSE:BABA) Group Holding Ltd, Baidu Inc (NASDAQ:BIDU) and JD.com, to prepare for more audit disclosures. Late last month, Fang Xinghai, the CSRC's vice chairman said he expected a deal in the near future.

U.S., Chinese regulators in talks for audit deal - sources
 

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Comments (4)
Dee Morris
Dee Morris May 08, 2022 2:26PM ET
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Totally a lying article at start then forgot to mention 7/7 update which I posted below. BEARISH!
Dee Morris
Dee Morris May 08, 2022 2:25PM ET
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Thanks for update:But a PCAOB spokesperson said, "Recent reports that PCAOB officials are currently in China, or that PCAOB officials were in China earlier this year to conduct face-to-face negotiations, are untrue. The PCAOB has not sent any personnel to China since 2017."
Dee Morris
Dee Morris May 08, 2022 2:23PM ET
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The PCAOB did not respond to requests for comment prior to the original publication of this story on Friday Later a spokesman for the agency said in an email: "Recent reports that PCAOB officials are currently in China, or that PCAOB officials were in China earlier this year to conduct face-to-face negotiations, are untrue. The PCAOB has not sent any personnel to China since 2017." He added that the agency continues to engage with the Chinese authorities but "speculation about a final agreement remains premature." As a result, the PCAOB is planning "for various scenarios," the spokesman said.
Marcus Bennett
Marcus Bennett May 06, 2022 6:09AM ET
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America needs to pay their outstanding Bill's & request for thier government bonds to be paid paid back in full form. America isnt the richest place anymore! the banks are floating off of nothing now! the economy is enduring another financial recession. its founders and people are also waiting on the American reserve's to pay them in full for thier hard work.Biden and the liberals well soon be removed from their chairs if they dont get things in order fast enough. the people will not wait until the next federal election for this matter to be addressed and paid in full. Word is bond
Matt Skinner
Matt Skinner May 06, 2022 6:09AM ET
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You lack a lot of basic economca knowledge in this statement but the first is the only reason china has usa bonds is the have usa cash from trade and have nothing to do with it. China is broke sonis every other country in the world. Usa debt to gdp is in line with other high end countries.
Miriam Morkhul
Miriam Morkhul May 06, 2022 6:09AM ET
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Not every other country in the world is broke. Look at central banks who accumulated gold.
 
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