China announced audit changes which may allow Chinese firms to remain listed in the U.S.

Over the weekend, the China Securities Regulatory Commission (CSRC) revised its accounting rules to allow foreign accounting firms to conduct on-site inspections, which had been a key hurdle in talks with the U.S. on allowing Chinese firms to remain listed on exchanges there. U.S. regulators had set a deadline of 2024 for removing non-compliant Chinese firms from the New York Stock Exchange (NYSE) and Nasdaq, according to a «Bloomberg» report.

The lack of an agreement has been one factor weighing heavily on U.S.-listed Chinese tech giants. For example, the U.S.-listed shares of Alibaba have plunged more than 50 percent over the past 12 months. On Monday, the Hang Seng Tech Index -- which includes large Chinese tech firms such as Baidu, Alibaba and Tencent – jumped 3 percent by 12:05 p.m. HKT.

The U.S. Public Company Accounting Oversight Board (PCAOB) did not immediately return finews.asia’s emailed request for comment, which was sent outside of U.S. office hours. Last month, the PCOAB had said that full access for audit information was «not negotiable,» and that any agreement would only be a first step toward compliance. «An agreement without successful execution will not satisfy U.S. law,» PCAOB said last week.

Allowing Investigations

The weekend announcement, called «Provisions on Strengthening Confidentiality and Archives Administration for Overseas Securities Offering and Listing,» or just Provisions, said overseas regulators can request to investigate Chinese firms, both to collect evidence and/or to conduct inspections for securities-market reasons. The inspections would be under a cross-border regulatory cooperation mechanism, with Chinese government assistance, the CSRC said, according to the English translation of the draft document on its website.

«The modification demonstrates the open attitude that Chinese regulators have consistently held towards audit oversight cooperation and the alignment of the Provisions with international common practice, which will lay an institutional foundation for secure, efficient cross-border regulatory cooperation including joint inspections,» the CSRC said in response to media questions, according to the English translation.

Chinese regulators had previously objected to the inspections by foreign accounting firms on national security grounds.

«Opening Up»

«The revision is consistent with the principle of promoting opening-up while maintaining security, and will promote orderly securities offering and listing activities in overseas markets by domestic companies,» the CSRC said.

The Provisions still require companies to highlight to regulators when information may be considered a state secret or sensitive information, and then apply for approval from Chinese regulators.

«The revised Provisions will provide a clearer guidance on confidentiality and archives administration for the overseas securities listing and offering by relevant market entities,» the CSRC said.

«In practice, documents and materials provided by companies to relevant securities companies and securities service providers rarely contain state secrets and sensitive information,» the Chinese regulator said.