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HONG KONG — U.S. regulatory officers have arrived in Beijing looking for to settle a long-running dispute over the auditing compliance of U.S.-listed Chinese language corporations, three individuals conversant in the matter advised Reuters.
The stand-off, if not resolved, might see Chinese language corporations kicked off New York bourses. This week the U.S. Securities and Trade Fee (SEC) added over 80 corporations, together with e-commerce large JD.com and China Petroleum & Chemical Corp to the listing of corporations going through attainable expulsion.
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The talks between officers from the U.S. Public Firm Accounting Oversight Board (PCAOB) and their counterparts on the China Securities Regulatory Fee (CSRC) might be described as ‘late stage’ after China made concessions in latest months, the individuals mentioned.
The PCAOB officers are anticipated to exit quarantine and begin working subsequent week, one of many individuals mentioned. If this go to proceeds as anticipated, the PCAOB is more likely to ship an even bigger staff to China later this yr to conduct on-site inspections of native auditors, the particular person mentioned.
The PCAOB despatched representatives to China for face-to-face negotiations earlier this yr, mentioned two of the individuals.
The sources declined to be recognized because of the sensitivity of the problem. The CSRC didn’t straight deal with Reuters queries in regards to the arrival of PCAOB officers or the standing of discussions.
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The PCAOB didn’t reply to requests for remark previous to the unique publication of this story on Friday.
Later a spokesman for the company mentioned in an e-mail: “Current stories that PCAOB officers are at present in China, or that PCAOB officers had been in China earlier this yr to conduct face-to-face negotiations, are unfaithful. The PCAOB has not despatched any personnel to China since 2017.”
He added that the company continues to interact with the Chinese language authorities however “hypothesis a couple of ultimate settlement stays untimely.” Because of this, the PCAOB is planning “for numerous situations,” the spokesman mentioned.
Authorities in China have lengthy been reluctant to let abroad regulators examine native accounting corporations, citing nationwide safety issues.
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However in a key concession, Chinese language regulators final month proposed revising confidentiality guidelines for offshore listings and scrapping necessities that on-site inspections of overseas-listed Chinese language corporations be performed primarily by home regulators.
Separate sources additionally mentioned final month {that a} preliminary framework for audit supervision cooperation between the 2 international locations has been fashioned.
The spat over audit oversight of New York-listed Chinese language corporations has been simmering for greater than a decade nevertheless it got here to a head final December when the SEC finalized guidelines to delist Chinese language corporations underneath the Holding International Corporations Accountable Act. It mentioned there have been 273 corporations in danger however didn’t identify them.
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As of Friday, the PCAOB has recognized 128 Chinese language corporations as liable to being delisted.
The problem has been a significant factor dragging on American depositary receipts (ADRs) issued by Chinese language corporations, with the Nasdaq Golden Dragon China Index tumbling 57% over the previous 12 months.
Goldman Sachs estimated in March that U.S. institutional traders held round $200 billion price of Chinese language ADRs.
Along with the concessions by Chinese language regulators, there have been different indicators {that a} deal is within the offing.
In late March, sources mentioned the CSRC requested among the nation’s U.S.-listed corporations, together with Alibaba Group Holding Ltd , Baidu Inc and JD.com, to arrange for extra audit disclosures. Late final month, Fang Xinghai, the CSRC’s vice chairman mentioned he anticipated a deal within the close to future. (Reporting by Xie Yu; Extra reporting by Katanga Johnson in Washington, Selena Li in Hong Kong and Jing Xu in Beijing; Modifying by Edwina Gibbs)
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