HONG KONG: The list of Chinese companies facing delisting risks in New York in a long-running dispute over Chinese audits of their accounts continues to expand with the addition of three more on Friday (Aug 5) after e-commerce giant Alibaba’s July inclusion.
As talks between Beijing and Washington in search of a resolution drag on, US regulators and politicians have been ratcheting up calls for a resolution, hammering out a message to China that time is running out for both sides to strike a deal.
Here’s what you need to know about the deal talks so far, and what to watch out for in the coming months.
WHAT IS THE DISPUTE ABOUT?
US regulators have been demanding complete access to the audit working papers of New York-listed Chinese companies, essentially documents put together during the auditing of financial statements. Authorities in China have long been reluctant to let overseas regulators inspect domestic accounting firms, citing security concerns.
The spat came to a head in December when the US Securities and Exchange Commission (SEC) finalised rules that enable the prohibition of trading in Chinese companies’ shares.
Goldman Sachs estimated in March that US institutional investors held around US$200 billion of American Depositary Receipts (ADRs) in Chinese firms.
WHAT HAS HAPPENED SO FAR?
Regulators from the United States and China have been in negotiations for a deal since last year. While Beijing has in recent months said both sides are committed to reaching a deal, Washington has been more cautious on the outlook.
By Aug 7, the SEC identified 162 Chinese firms listed in New York as facing delisting risks. Trading prohibition will be imposed on a company if it fails to comply with audit working papers requests for three consecutive years, starting from spring, 2024.
Last week the chair of the US corporate auditing watchdog said it would not accept any restrictions on its access to the audit papers for New York-listed Chinese companies.