According to insiders, Chinese regulators have instructed several of the country’s U.S.-listed companies, such as Alibaba, Baidu, and JD.com, to prepare for greater audit disclosures as Beijing ramps up efforts to keep domestic firms listed in New York.
According to two sources, China’s regulators are considering allowing their American counterparts to see audit working documents of some Chinese enterprises that do not collect sensitive data.
According to four persons familiar with the situation, the China Securities Regulatory Commission (CSRC) and other regulatory agencies summoned big internet businesses earlier this month, including search engine leader Baidu Inc (9888. HK) and e-commerce behemoth JD.com Inc (9618. HK).
Alibaba Group (9988. HK) and Weibo Corp were among the internet companies summoned by the regulator, according to two sources with direct knowledge of the matter. The meeting was also attended by e-retailer Pinduoduo Inc (PDD.O) and gaming giant NetEase Inc (9999. HK), according to one of them.
According to the individuals, they were requested to produce audit documentation for the 2021 financial year while keeping in mind U.S. authorities’ requests for additional information. They did not want to be identified since they were not authorized to divulge the meeting’s details.
According to the first source, corporations should seek Chinese regulators’ counsel if they are “unsure about anything” during the entire process, which includes audits and discussions with US regulators.
A request for comment from the CSRC was not immediately returned. A request for comment from Alibaba, Baidu, JD.com, and Weibo was not immediately returned. Pinduoduo and NetEase did not respond to requests for comment.
The latest move by Chinese regulators demonstrates Beijing’s willingness to make some concessions in order to end a long-running Sino-US audit standoff that has jeopardized hundreds of billions of dollars in US investments in Chinese firms. If Chinese businesses’ audit records are unavailable for scrutiny for three years in a row, US regulators are considering delisting them from American stock markets.
The Securities and Exchange Commission (SEC) of the United States finalized procedures to delist Chinese businesses under the Holding Foreign Companies Accountable Act (HFCAA) in December, saying it had identified 273 companies in danger but did not name them.
For the first time, the SEC named five of these companies that could be delisted, including KFC operator Yum China Holdings (9987. HK) and biotech business BeiGene Ltd (6160. HK). CSRC said it was optimistic it would reach a deal with its US counterparts to resolve the matter, describing the SEC’s move as “standard practice.”
Three sources said Chinese regulators were still debating whether to require more audit disclosure from local companies listed on the New York Stock Exchange.
