Beijing has changed its audit secrecy laws in order to prevent the removal of some 270 Chinese companies from the US stock exchanges, while significantly relinquishing pressure from Washington.
The Securities and Exchange Commission of China, Beijing’s senior financial watchdog, said on Saturday it would change the secrecy laws that prevent its overseas companies from providing sensitive financial information to foreign regulators.
The CSRC said its existing rules, recently updated in 2009, are outdated.
This is Beijing’s most significant move to date to try to prevent Chinese companies in New York from being wiped out in 2024. Securities Authority and the Stock Exchange Said last month That the major companies in China, including Baidu and Yum China, had three years to provide detailed audit documents, which resulted in a sharp sale of their shares.
There are about 270 Chinese companies listed in the US with a combined market capitalization of over $ 2 billion. The Nasdaq Golden Dragon China index, which tracks blue Chinese stocks, has lost about half of its value in the past year.
Beijing’s unusual policy reversal is expected to provide a framework for U.S. regulators to gain access to corporate audit files and is China’s first major general change to allow the disclosure of financial information outside the country. This was reported by the Financial Times Because the regulators in Beijing were in discussions about the proposals in March.
The latest rules, submitted for public consultation until April 17, eliminate a requirement that the financial statements of overseas Chinese companies traded must be conducted primarily by Chinese regulators.
The changes will facilitate “cross-border regulatory cooperation including joint testing… To protect global investors,” according to the CSRC.
It follows months of negotiations between regulators in China and the US to resolve the long-running dispute over access to audits.
The Chinese authorities are trying to do this Improve investor confidence After a series of regulatory frustrations and the sale of disaster shares – as by a Chinese travel app Didi – Shake global markets.
The CSRC said its chairman Ye Hoyman and SEC Chairman Gary Gensler had held three meetings since August on “audit oversight cooperation” and that there had been “positive progress”.
However, U.S. regulators have rejected a proposal for an imminent deal that would stop the countdown to the write-off. Gensler said last week that only complete compliance with U.S. audit tests would allow Chinese companies to continue trading in New York markets.
Geopolitical tensions between the US and China, including in the wake of the recent Russian invasion of Ukraine, have led to fears that a compromise on access to criticism is unreasonable. He added: “The US needs to be careful, if they continue to put pressure on China, they will end up hurting themselves.”
According to the rules issued in 2009, audit documents produced while registering Chinese companies abroad should not be shared with foreign entities. This conflicts with the Foreign Companies Holdings Act, passed in 2020, which forces Chinese and Hong Kong companies to allow the Board of Auditors Of U.S. public companies review their reviews.
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