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The White House plans to require U.S.-listed Chinese companies to comply with U.S. audit requirements or be delisted

via:CnBeta     time:2020/8/7 12:23:11     readed:246

After the recent crackdown on tiktok, the trump administration began to "threaten" more Chinese companies.According to the Wall Street Journal on August 6, local time reported that the White House put forward a proposal that requires Chinese companies listed in the United States to comply with the audit requirements of the United States, or they will be forced to delist.

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The report pointed out that this plan has been "brewing for a long time" and has not been formally implemented. American regulators have been unable to inspect the financial audit status of Chinese companies listed in the United States for a long time, which has caused a lot of controversy in the United States.

According to the new plan, Chinese companies that have not yet listed but plan to conduct initial public offerings (IPOs) in the United States must comply with relevant regulations before listing on the New York Stock Exchange (NYSE) or NASDAQ (hereinafter referred to as NASDAQ); Chinese companies that have been listed on the NYSE or NASDAQ must choose to comply with the U.S. regulations or abandon trading before 2022. If so, Chinese auditors must share relevant documents with U.S. regulators.

Screenshot of Wall Street Journal report

The Wall Street Journal reported that the new proposal, launched on June 6, is similar to the content of the Senate in May this year by two-party members jointly sponsored and passed a bill. The bill was introduced by Republican Senators John Kennedy (John Kennedy) and Chris Van Hollen (Chris Van Hollen) at the time.

In the U.S. Congress, the two parties have been keeping a close eye on the trends of Chinese companies listed in the United States for a long time. With the recent tension in Sino US relations, these congressmen's "worries" have further deepened, especially at the political level.

This time, the trump administration will ask the securities and Exchange Commission (SEC) to formulate specific rules to regulate the auditing of Chinese companies listed in the United States.

It is unclear how Chinese companies and auditors will react, but the White House's new proposal clearly has ulterior motives. In fact, the Chinese government has always exercised strict supervision over Chinese companies listed in the United States.

It is worth noting that article 177 of Chapter 12 of the securities law of the people's Republic of China states that:The securities regulatory authority under the State Council may establish a supervision and management cooperation mechanism with securities regulatory agencies of other countries or regions to implement cross-border supervision and administration

Taking the "Ruixing coffee financial fraud incident" as an example, the China Securities Regulatory Commission (CSRC) said on April 27 that it had a positive attitude towards cross-border regulatory cooperation and supported overseas securities regulatory agencies to investigate and deal with financial fraud of listed companies within their jurisdiction.

In an exclusive interview with Caixin reporter in mid June, Yi Huiman, chairman of the China Securities Regulatory Commission, said that the recent "financial fraud incident of lucky coffee" could not represent all China capital stock companies listed in the United States. Some political forces in the United States forced China capital stock market to delist, which will inevitably lead to "double losses" or "multiple losses". China Securities Regulatory Commission will continue to strengthen extensive cooperation with overseas financial regulators and international financial organizations, actively participate in international financial governance, and jointly establish a law enforcement alliance to crack down on cross-border securities violations.

In addition, article 177 of Chapter 12 of the securities law of the people's Republic of China also clearly stipulates that without the consent of the securities regulatory authority under the State Council and the relevant competent departments of the State Council, no unit or individual shall provide documents and materials related to securities business activities to overseas countries without authorization.

To avoid this "legal hurdle", the trump administration's plan is for an accounting firm to conduct a de facto "second audit" of a Chinese company, and all the accounting firm's records can be inspected by the U.S. public company accounting oversight board (PCAOB).

According to this method, the accounting firms in the United States can audit the financial statements of the Chinese company while auditing the subsidiaries of the Chinese company. A senior SEC official also insisted that "common auditing" exists in other countries.

A spokesman for the NYSE said that the listing standard of the exchange has always been a "industry benchmark" because it balances the relationship between investor protection and the provision of a wide range of market investments, and any new regulatory measures should continue to uphold this balance principle. NASDAQ did not respond.

In fact, both the PCAOB and the SEC have long tried to negotiate with China over the inspection of accounting records, but none of them succeeded. In fact, the SEC has been reluctant to see Chinese companies forced out of the NYSE or NASDAQ.

On August 5, U.S. Secretary of state pompeio even claimed that the US government would expand the scope of "clean 5g" and was stepping up efforts to remove "untrusted" Chinese applications from the US digital network. He also listed tiktok and wechat as "major threats" to the United States.

In this regard, Wang Wenbin, spokesman of China's foreign ministry, said at a regular press conference on June 6 that pompeio and other US politicians have repeatedly abused state power to suppress and contain China's high-tech enterprises under the pretext of safeguarding national security. China firmly opposes this.

Wang Wenbin said that the US side's relevant practices have no factual basis at all, and are totally malicious slander and political manipulation. Their essence is to maintain their high-tech monopoly status, completely violate market principles and international economic and trade rules, and seriously threaten the security of the global industrial chain supply chain, which is a typical hegemonic act.

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