The U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler said on Wednesday (27th) that the U.S. and China must reach an agreement on the audit working papers of Chinese companies as soon as possible to avoid the delisting of Chinese stocks from U.S. stocks.
“We have no intention of sending PCAOB auditors to China and Hong Kong unless the U.S. and China reach a framework agreement that allows the PCAOB to conduct a full investigation of auditors,” Gensler said Wednesday. The PCAOB is overseen by the SEC.
Gensler said that China’s quarantine requirements related to the epidemic and logistics mean that the United States and China need to reach an agreement on the audit method as soon as possible.
The U.S. Congress is considering legislation to speed up the process of delisting Chinese stocks. Gensler said that if congressmen pass the bill under consideration, it may lead to the delisting timetable of Chinese concept stocks being advanced to 2023, which was originally 2024.
Gensler said last week that it was unclear whether the U.S. and China could reach a deal. He said frankly: “I really don’t know whether the US and China can reach an agreement, and whether the actual financial reports of Chinese stocks can be audited in accordance with the legal requirements of the US. The Chinese authorities must make a decision. So far, the negotiations between the two sides have been constructive.”
The U.S. and Chinese regulators have been negotiating to grant the U.S. audit and regulatory agency full access to the audit working papers of about 200 Chinese companies including Alibaba (BABA-US) and JD-US (JD-US). If PCAOB auditors are unable to obtain the manuscript, a law signed by the United States in 2020 may force these Chinese companies to delist from the Nasdaq and the New York Stock Exchange, and must be delisted as soon as 2024.
Dozens of countries around the world have allowed their U.S.-listed companies to be audited by the U.S., allowing U.S. officials to visit local accountants and scrutinize their working documents. China and Hong Kong rejected the U.S. audit, citing secrecy laws and national security concerns.