- As the standoff comes to a head, there are some signs that China and the U.S. are working towards a solution as no one stands to gain from a wave of delistings.
- Beijing has indicated that some Chinese companies can remain listed and submit themselves to the audit transparency requirement and a deal could already have been reached.
During the Trump administration, U.S. regulators demanded Chinese companies and auditors make financial audits available for inspection every three years or risk being forced to delist from Wall Street.
But Beijing pushed back, as China doesn’t allow foreign regulators to inspect Chinese company audits.
With a deadline to comply with Washington’s demands fast approaching, this month, five state-owned Chinese companies said they would voluntarily delist from U.S. exchanges, weighing down prices of Chinese shares at a time when the economy is facing a mounting property crisis.
As the standoff comes to a head, there are some signs that China and the U.S. are working towards a solution as no one stands to gain from a wave of delistings.
Instead of an “all-or-nothing” binary option when it comes to remaining listed in the U.S., Beijing has indicated that some Chinese companies can remain listed and submit themselves to the audit transparency requirement and a deal could already have been reached.
The U.S. Public Company Accounting and Oversight Board, an auditor watchdog, has said any agreement would include full U.S. access to Chinese auditors.
And this paves the way for a “dual track” option, where those companies that Beijing deems too sensitive to allow for full transparency on national security grounds will need to be delisted, while those in industries less “sensitive” could maintain the status quo.
News of a possible settlement has already buoyed shares of U.S.-listed Chinese companies, even as investors braced themselves for the possibility that Chinese airlines would be next to voluntarily delist.
Neither Washington nor Beijing stands to benefit from the standoff, especially as global economic conditions worsen and Wall Street stands to lose a substantial amount in fees and volume from a wave of Chinese delistings.
