[Global Times reporter Ni Hao]
According to the agreement between China and the United States on the audit of
Chinese stocks at the end of August, the China Securities Regulatory Commission
will arrange for Chinese companies listed in the United States and their
accounting firms to transfer their audit papers and other data from the
mainland to Hong Kong was inspected by the US in mid-September. The
"Foreign Company Accountability Act" promulgated by the United States
at the end of 2020 stipulates that if Chinese concept stocks listed in the
United States fail to submit the reports required by the American Public
Company Accounting Oversight Board (PCAOB) for three consecutive years, the United
States Securities and Exchange Commission (SEC) The right to delist it from
U.S. exchanges. More than 160 Chinese companies have so far been identified by
the SEC as not complying with U.S. audit rules, including Chinese internet
giants Alibaba, JD.com and Pinduoduo. According to the website of the
Securities Regulatory Commission, on September 14, another Chinese concept
stock company was included in the “pre-delisting” list. The cooperation between
China and the United States in auditing supervision is considered to be an
important turning point for Chinese concept stocks listed in the United States.
According to a report by the U.S.
“Wall Street Journal” on the 16th, SEC Chairman Gary Gensler disclosed that the
staff of the U.S. PCAOB is expected to begin examining the audit papers of
U.S.-listed Chinese concept stocks on September 19. Gensler told a Senate
Banking Committee hearing that the entire process would take eight to 10 weeks,
or the results of the inspections could be available in early December 2022. He
also said that Chinese regulators said they would abide by the terms of the
agreement.
Hong Kong's "South China
Morning Post" said in a report on the 15th that staff from the PCAOB will
arrive soon. The source also revealed that before these staff members can start
audit inspections, they need to undergo a three-day hotel quarantine and a subsequent
four-day home medical monitoring in accordance with Hong Kong's regulations. As
of the press time of the Global Times on the 18th, there was no news that PCAOB
staff had arrived in Hong Kong.
The "South China Morning
Post" reported on the 15th that two of the world's four largest accounting
firms: PricewaterhouseCoopers and KPMG have been notified that PCAOB has
selected them for several audit clients (China Concept Stock Company) checking.
And the two companies have prepared the audit materials to be provided in paper
and electronic versions. The source also revealed that all audit records have
been filed in accordance with PCAOB standards and auditors are ready to be
interviewed at PCAOB request. Two other big four accounting firms, Deloitte and
Ernst & Young, have not yet been notified by the PCAOB, but are expected to
receive invitations soon.
According to previous foreign media
reports, U.S. regulators have selected Alibaba, NetEase, Baidu, JD.com and Yum
China as the first batch of Chinese stock companies to be inspected for audit
papers.
On the evening of August 26, the
China Securities Regulatory Commission and the Ministry of Finance officially
announced that they signed an audit supervision cooperation agreement with
PCAOB, and made it clear that relevant cooperation will be launched in the near
future. According to a statement released by the SEC on the same day, PCAOB
staff will start work in Hong Kong in mid-September.
According to PCAOB data, the Big
Four accounting firms provided audit services for more than 130 of the 168
mainland Chinese companies listed in the United States, accounting for more
than 78% of the total. In total, about 168 U.S.-listed Chinese companies were
audited by 15 PCAOB-registered Hong Kong and mainland accounting firms as of
June. The companies, which have a combined market capitalization of $1.5
trillion, will be delisted from U.S. exchanges under the Foreign Company
Accountability Act if they do not allow the PCAOB to review their audit records
for three consecutive years.
The probability of delisting of
Chinese concept stocks has decreased
The China Securities Regulatory
Commission pointed out in a news release on the evening of August 26 that in
the next step, China and the United States will cooperate with relevant
accounting firms to carry out daily inspections and investigations in
accordance with the cooperation agreement, and make an objective evaluation of
the effect of cooperation. If the follow-up cooperation can meet their
respective regulatory needs, it is expected to solve the audit and supervision
problems of Chinese concept stocks, thereby avoiding passive delisting from the
United States.
After the Sino-US agreement was
reached, Goldman Sachs believes that the probability of Chinese concept stocks
being forced to delist from the United States has dropped from 95% in March to
50%. If the delisting risk is completely eliminated, it may drive the
price-earnings ratio of Chinese concept stocks to increase by 11%. . The Wall
Street Journal believes the deal, reached after a decade-long standoff between
Chinese and U.S. regulators, opens a way to avoid the forced delisting of about
200 Chinese companies from U.S. exchanges in early 2024.
The South China Morning Post
reported that Drew Bernstein, co-chairman of New York-based McKay Asia, said
that if the first round of audit inspections in Hong Kong goes well, it should
encourage more Chinese companies to U.S. seeks listing. "I believe we will
see a large backlog of Chinese companies entering the market in 2023," he
said.
Chinese concept stocks are the
common interests of China and the United States
Dong Shaopeng, a senior researcher
at the Chongyang Institute of Financial Studies at Renmin University of China,
told the Global Times reporter on the 18th that according to the information
disclosed so far, the PCAOB is obviously ready for the upcoming inspection
work, and the Chinese side will follow the agreement reached by the two sides
last month. , support and cooperate under the principle of reciprocity and
mutual benefit.
Dong Shaopeng believes that the
PCAOB may organize some experienced staff, or focus on checking some companies,
or conduct spot checks on some Chinese concept stocks. China and the United
States have common interests in the listing of Chinese stocks in the United States.
It is hoped that the PCAOB inspection work will abide by the agreement reached
by the two parties and abide by the laws and regulations of the Chinese side.
However, Dong Shaopeng also believes that the confrontation between the United
States is relatively serious. He hopes that the inspection work of the PCAOB in
the United States will adhere to the principle of cooperation, abide by the
laws of both sides, and take the protection of investors as the starting point
to serve the fairness and justice of the market, and not to mix anyone with
politics. factor.
As the United States has been
putting pressure on Chinese companies in the capital market for some time, many
Chinese concept stocks have achieved or are seeking secondary listings or dual
primary listings in Hong Kong to gradually get rid of their dependence on the
US capital market. Some large state-owned enterprises chose to delist from the
US due to their small transaction volume. On the evening of August 12, China
Life, Sinopec, PetroChina, Aluminum Corporation of China, and Shanghai
Petrochemical collectively issued an announcement to delist American depositary
shares from the New York Stock Exchange. Prior to this, China's three major
operators have been delisted from the United States. The market believes that
the return of Chinese stocks and Hong Kong, which is an international financial
center, has become a trend, and some large state-owned enterprises are delisted
from the United States, which can also avoid possible data security risks.
According to data from market institutions, as of August, the total amount of funds raised by IPO channels in the United States this year was only US$5.1 billion, far below the average level of about US$33 billion in the same period in the past 20 years. In the first half of 2021, a total of 37 Chinese concept stocks have IPOs in U.S. stocks, compared with only 3 in the same period in 2022.
source: https://www.sina.com.cn/
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