China and U.S. should be able to strike a deal on the auditing dispute that threatens the listings of key Chinese firms on American stock exchanges, according to a senior executive at China’s top investment bank.
Regulators of the two countries are believed to be having “earnest” discussions with an aim to resolve the issue, Wang Sheng, head of the investment banking division at China International Capital Corp., said in an opinion piece published by the Economic Daily on Sunday. The newspaper is affiliated with the State Council, China’s cabinet.
“As a participant in the capital markets of two nations, we believe a solution can be found that both ensures data security of the region where the companies are domiciled and meet the regulatory requirements of the region where the firms are listed,” Wang said in the article.
The U.S. Securities and Exchange Commission last week identified five Chinese firms under the Holding Foreign Companies Accountable Act, which it says the Public Company Accounting Oversight Board was unable to inspect. The newly identified firms could be subject to delisting from U.S. exchanges if they fail to comply with the HFCAA’s auditing requirements for three consecutive years.
The news triggered the steepest slump of Chinese stocks listed in the U.S. since the global financial crisis. Traders also sold off Chinese tech shares traded in Hong Kong.
The selloff in the U.S. was “somewhat irrational,” Wang said. It’s “too early” to conclude the five Chinese firms put on the provisional list by the SEC will be delisted, he said.
The SEC’s identification of companies to be added onto the list is based on the 2021 reports disclosed by the firms. The list is expected to get longer in the coming months as more companies report, but they will not be required to exit the market immediately, he said.
Following the SEC’s move, the China Securities Regulatory Commission issued a statement saying it would like to cooperate with U.S. regulators on the inspections and investigations of relevant accounting firms. Positive progress has been made in recent dialogues between the CSRC, China’s finance ministry and PCAOB in the U.S., it said.