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The Chinese regulator tries to prevent its companies from being blacklisted in the US

FILE PHOTO: A Chinese national flag flies outside the China Securities Regulatory Commission building on Financial Street in Beijing, China, July 9, 2021. REUTERS / Tingshu Wang

By Scott Murdoch

HONG KONG, Nov 25 (Reuters) – Chinese authorities are working with their US counterparts to prevent Chinese companies from being delisted from the US stock exchanges, a Chinese regulatory official said on Thursday, as a lengthy dispute over auditing standards.

The US authorities are preparing to exclude foreign companies from US exchanges if their audits do not meet US standards.

The Public Companies Accounting Oversight Board (PCAOB) and US economic authorities have long complained about the lack of access to audit working documents of Chinese companies listed in the United States. Citing national security reasons, the Chinese authorities have been reluctant to allow foreign regulators to inspect the working documents of local accounting firms.

“We do not think delisting Chinese companies from the US market is a good thing for companies, global investors, or Sino-US relations,” said Shen Bing, director general of the department of international affairs. of the China Securities Regulatory Commission (CSRC), at a conference in Hong Kong.

“We are working very hard to resolve the audit issue with our US counterparts, communication is currently fluid and open. There is a risk that these companies will be delisted, but we are working very hard to avoid it,” he added.

In December 2020, during the last weeks of his administration, President Donald Trump signed a law aimed at removing foreign companies from US stock exchanges if they failed to comply with US auditing standards for three consecutive years.

A map on the organization’s website showed China as the only jurisdiction denying the PCAOB “the necessary access to carry out supervision.”

At the same conference, Ashley Alder, CEO of Hong Kong’s Securities and Futures Commission (SFC), said he feared that tensions between China and the United States could prevent a solution.

“Sometimes politics can interrupt technical solutions that are sensible and achievable, and I capture a degree of political attitude within American institutions that is not necessarily conducive to a better outcome.”

Hong Kong previously faced similar problems with access to mainland China’s audit working papers, but Alder said the SFC’s relationship with the CSRC and an agreement reached in 2019 had helped resolve them.

Hong Kong has benefited from the dispute between China and the United States, as a number of Chinese companies listed in the US have carried out a secondary listing in the city in recent years, partly as a backup in case the companies stop trading on the Nasdaq or the New York Stock Exchange, market participants say.

Last week, the Hong Kong Stock Exchange confirmed that it was modifying the rules to facilitate the secondary listing of Chinese companies listed abroad and for companies to change their secondary listing in Hong Kong to a primary one.

(Reporting by Scott Murcoch; writing by Alun John; editing by Muralikumar Anantharaman and Simon Cameron-Moore, translated by José Muñoz in the Gdańsk writing)

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