US-listed Chinese companies face lower risk of delisting after audit access

  • Alibaba and other US-listed Chinese companies face lower risk of delisting after officials gained access to audit data.
  • Inspections by the Public Company Accounting Oversight Board reduce the chance of 200 companies being delisted.
  • The inspectors carried out on-site work in Hong Kong, but have not yet gained access to mainland China.

Shares of US-listed China-based companies, including Alibaba, faced lower risk of delisting on Thursday after US officials were allowed to review documents from Chinese auditing firms, a development key in a longstanding dispute between the countries.

Inspectors from the US Public Company Accounting Oversight Board examined thousands of pages of paperwork and took testimony from corporate audit firms in Hong Kong over nine weeks from September to November, the accounting watchdog said in a communicated on Thursday.

The work reduces the chance that about 200 Chinese companies will be delisted from US stock exchanges.

“The United States Congress sent a clear message by passing the Foreign Company Accountability Act of 2020 (HFCAA) that access to the capital markets of the United States is a privilege and not a right,” said the PCAOB. “Investors are now more protected because Congress has acted, giving the PCAOB leverage through the HFCAA to secure this unprecedented access.”

Shares of e-commerce heavyweight Alibaba and rival, as well as search engine giant Baidu, had rallied earlier in the session on Wednesday but drifted into the red as part of a broader slide. of US stocks for fear of a recession.

In August, the US reached a preliminary agreement that would allow US regulators to inspect audit logs in China, a development in the accounting dispute that has existed for more than a decade between the US and China. Chinese officials have cited national security concerns in shutting down the inspection demands.

The PCAOB inspected documents on-site in Hong Kong from affiliates of KPMG and PricewaterhouseCoopers, but staff have yet to gain access to mainland China from the People’s Republic of China.

The watchdog said it continues to require full access in mainland China and Hong Kong and is already planning regular inspections starting in early 2023.

“If PRC authorities obstruct the PCAOB’s access to fully inspect or investigate in any way at any time, the Board will act immediately to consider the need to issue new determinations consistent with the HFCAA,” it said.

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