As reported by Bloomberg on April 2, China amended an old rule that limited offshore-listed firms’ financial data sharing practice, removing a legal hurdle for US regulators to have full access to auditing reports of the majority of more than 270 Chinese firms listed in New York.
In a statement on Saturday, April 2, China Securities Regulatory Commission (CSRC) said the draft rules deleted the requirements that on-site inspections should be mainly conducted by Chinese regulatory agencies or rely on their inspection results.
That could give a chance to inspections by US regulators, who demand full access to such companies’ audit working papers, which are stored in China.
The CSRC will help during the process through a cross-border regulatory cooperation mechanism. Meanwhile, all foreign-listed firms will be responsible for properly managing confidential and sensitive information and protecting national information security.
The draft rules mark Beijing’s latest attempt to solve a long-running audit dispute with Washington that could lead to the delisting of roughly 270 Chinese firms from US exchanges in 2024.
More than 200 US-listed Chinese firms have a combined market capitalization of 2.1 trillion dollars as of May 2021. They are composed of eight national-level state-owned enterprises. The threat of delisting and China’s regulatory crackdowns have sparked a selloff in the Nasdaq Golden Dragon China Index, which lost about half its value in the past year.
In March, 11 US-listed Chinese companies, including Baidu and Yum China, were put on the potential delisting list of the US Securities and Exchange Commission (SEC).