Hong Kong / Beijing, March 22 -Chinese regulators have asked some US listed companies, such as Alibaba, Baidu and JD.com, to prepare for audit disclosure. Domestic companies remain listed in New York.
This is because Chinese regulators are considering proposals to allow US counterparts to inspect audit working papers for some Chinese companies that do not collect sensitive data.
As part of that move, the China Securities Regulatory Commission (CSRC) and other regulators earlier this month announced search engine leader Baidu Inc (9888.HK) and e-commerce giant JD.com Inc (9618). .HK) and other top internet companies have been summoned. ), Four sources told Reuters.
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Unnamed sources were asked to prepare an audit document for fiscal year 2021 with further disclosure requests from U.S. regulators in mind, as they were not allowed to discuss the details of the meeting. Stated.
Companies should better seek the advice of Chinese regulators if the entire process described by the first source, including audits and communication with US regulators, is “uncertain about something.”
CSRC did not immediately respond to the request for comment.
Alibaba, Baidu, JD.com and Weibo did not immediately respond to requests for comment. Pinduoduo and NetEase also did not immediately provide comments.
The latest action by Chinese regulators is Beijing’s willingness to make some concessions to resolve a long-term Central American audit standoff that is endangering hundreds of billions of dollars in U.S. investment in Chinese companies. is showing.
US officials are moving to expel Chinese companies from the US stock exchange if audit records of Chinese companies are not available for inspection for the third consecutive year.
Delisting risk
In December, the U.S. Securities and Exchange Commission (SEC) finalized a rule excluding Chinese companies under the Corporate Social Responsibility Act (HFCAA), identifying 273 companies at risk without name. Said.
Earlier this month, the SEC first named five of these companies, including KFC operator Yum China Holdings (9987.HK) and biotechnology company BeiGene Ltd (6160.HK), which may face delisting. Did.read more
The CSRC described the SEC’s move as a “normal procedure” and said it was confident that it would reach an agreement with its US counterparts to resolve the dispute.
Chinese regulators are in the process of discussing strengthening audit disclosures with New York-listed domestic companies, according to three sources.
Washington has long demanded full access to books from U.S.-listed Chinese companies, but Beijing has banned foreign inspections of working papers from local accounting firms because of national security concerns. doing.
The map on the website of the Public Company Accounting Oversight Board (PCAOB), an auditing body that helps monitor US listed companies, is the only jurisdiction that China has denied the organization’s “access required to perform monitoring.” Shown that it is an area. “.
Goldman Sachs estimated on March 11 that US institutional investors have approximately $ 200 billion of exposure to American Depositary Receipts (ADRs) of Chinese companies.
The Nasdaq Golden Dragon China Index, which tracks Chinese companies trading on Wall Street, has fallen by nearly 60% in the last 12 months.
In an attempt to alleviate investor anxiety, China’s Deputy Prime Minister Liu He said last week that talks between China and U.S. regulators on U.S.-listed companies have progressed and both sides are working on a concrete cooperation plan. Said.
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Reported by Yingzhi Yang, Julie Zhu, Xie Yu and Kevin Huang. Edited by Sumeet Chatterjee and Jacqueline Wong
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