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Will China Accept Report to Prevent U.S. Delistings?

by Carl Steward
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ChinaWill China Accept Report to Prevent U.S. Delistings?

China’s securities regulator refuted claims made in the media on Monday that Beijing intended to group Chinese companies with U.S. listings according to how sensitive the data they store is to prevent American authorities from delisting hundreds of companies.


The Financial Times reported on Sunday, citing people with knowledge of the situation, that the three-tier structure intends to bring Chinese corporations into conformity with U.S. regulations that would force public companies to permit authorities to examine their audit files.


According to a statement, CSRC has not investigated a three-tier system of grouping businesses. Regardless of whether they are listed domestically or abroad, the regulator stated that enterprises are expected to comply with appropriate national data information management laws, regulations, and regulatory requirements of the location of the listing.


China Forbids Foreign Review of Domestic Data

Washington has long requested full access to the financial records of Chinese companies listed on the American stock exchanges, but Beijing prohibits foreign review of working papers from domestic accounting firms, citing national security concerns. The Holding Foreign Firms Accountable Act (HFCAA), which was approved late last year, designated over 270 Chinese companies listed in New York as being in danger of delisting.


Although the U.S. Congress is considering bipartisan legislation that might shorten the timeframe to 2023, the regulation provides Chinese corporations until early 2024 to comply with auditing standards. China asserted that an agreement to resolve the audit issue is committed to by both parties. On the prospects, though, the American side has been more cautious.


According to media reports, Securities and Exchange Commission Chairman Gary Gensler stated earlier this month that he was not especially confident that a settlement could be reached.


Early in April, China proposed dropping the requirement that on-site inspection of Chinese firms listed abroad be carried out primarily by Chinese authorities to settle a disagreement over cross-border audit inspections.

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