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China confirmed plans to revise confidentiality rules on overseas listings to prevent Chinese companies from being delisted in the US
The China Securities Regulatory Commission (“CSRC”) confirmed its plans in a press release on its website. The regulator said its original rules, introduced in 2009, are outdated. According to various media reports, the draft rules will be publicly discussed until April 17th.
“However, after more than a decade, the document has not kept pace with the changing legal and institutional landscape and evolving market and regulatory practices,” the regulator said in a separate statement.
The confirmation comes after Bloomberg reported on Friday that Chinese authorities are making plans to give US auditors full access to companies’ audit reports as early as mid-year. Alibaba (NYSE:BABA), JD.com (NASDAQ:JD), Didi Global (NYSE:DIDI) stocks. Pinduoduo (NASDAQ:PDD) and several other Chinese ADRs gained in the news on Friday.
The SEC has threatened to delist companies that don’t allow US regulators to review their company audits for three years, a rule that went into effect in late 2020. The agency last month named five companies from China that could be delisted for failing to comply with U.S. accounting rules.
Earlier this week, Baidu (BIDU) was added to the list that it could potentially be delisted under the Holding Foreign Companies Accountable Act (HFCAA). In response, Baidu said it was “actively exploring possible solutions.”
SEC Chairman Gary Gensler recently softened speculation about a possible upcoming deal for Chinese companies to avoid a US delisting, saying the talks had been “thoughtful and respectful”. [and] productive”, but he doesn’t know where the talks will lead.
On March 24, the Public Company Accounting Oversight Board told Seeking Alpha that it was not clear whether Chinese authorities would agree to allow US inspectors to fully review companies’ audit records.