US-listed China firms not likely to face delist pressure

The risks facing US-listed Chinese companies of forced delisting in 2024 have been largely removed as China-US auditing supervision cooperation yielded good results, experts said on Friday.

Officials and experts said the progress has proved the significant potential of bilateral regulatory cooperation on the basis of mutual respect, and called for further cooperative efforts to address remaining regulatory uncertainties to achieve mutual benefits.

"Practice has proved that a practical path for cooperation that accommodates the legal and regulatory requirements in both jurisdictions can certainly be found, as long as both sides work together with mutual respect, professionalism and pragmatism," officials at the China Securities Regulatory Commission said in a statement on Friday.

The statement was in response to a confirmation of the US Public Company Accounting Oversight Board on Thursday, saying that the US accounting watchdog had full access to inspect and investigate PCAOB-registered audit firms in China this year as the oversight cooperation agreement signed in August worked out.

The PCAOB also vacated its determinations to the contrary made last year, which experts said has largely dispelled the risk faced by US-listed Chinese issuers of being forced to delist from the US as early as 2024 as per the US Holding Foreign Companies Accountable Act, passed in 2020.

The commission "welcomes the PCAOB's decision to vacate its previous determinations based on professional and regulatory considerations," CSRC officials said in the statement.

The commission looks forward to carrying out audit oversight cooperation with US counterparts in the years to come, the statement said, based on previous experience and with enhanced mutual respect and trust.

"The latest development shows that China and US regulators can solve the technical problems faced in auditing supervision cooperation by taking a pragmatic approach and averting political interference," said Dai Guanchun, a senior capital markets lawyer based in Beijing.

On Aug 26, the CSRC, the Ministry of Finance and the PCAOB signed an agreement for audit oversight cooperation. A number of inspections and investigations of accounting firms have been carried out accordingly, which the commission said yielded "good progress".

The US regulator accessed audit documentation through Chinese authorities and conducted interviews of related personnel with the participation and assistance of the Chinese side, the CSRC statement said.

Nevertheless, some experts cautioned that delisting risks faced by US-listed Chinese issuers are not totally eliminated, as the HFCAA remains in effect while the PCAOB might reassess its determinations in the future.

Ren Zeyu, an associate professor at the China University of Political Science and Law in Beijing, said that both sides are still at the initial stages of cooperation and need to properly address the remaining issues such as the auditing deficiencies found in inspections.