Friday Sept 16 2022
WASHINGTON—U.S. regulators could know by Thanksgiving if Beijing is complying with an agreement designed to allow Chinese companies to continue trading on American stock exchanges.
Inspectors from the U.S. Public Company Accounting Oversight Board are preparing to travel to Hong Kong to begin reviewing the audit files of publicly traded Chinese companies, Securities and Exchange Commission Chairman Gary Gensler told lawmakers Thursday. The PCAOB is a nonprofit created by Congress and overseen by the SEC.
The inspectors are expected to depart Friday and start work next week, Mr. Gensler told members of the Senate Banking Committee. The process would take eight to 10 weeks. “So we’ll probably know somewhere around Thanksgiving or early December,” he said.
Washington and Beijing reached an agreement last month to allow the PCAOB to inspect the audits of Chinese companies listed on U.S. exchanges, a 20-year-old requirement of U.S. law that China hasn’t met. The agreement, which came after a decadelong standoff between regulators in the two countries, created a path that could prevent some 200 Chinese companies from being kicked off U.S. stock exchanges in early 2024.
The agreement allows PCAOB inspectors to travel to Hong Kong or mainland China for inspections. When it was signed last month, PCAOB officials said the deal promised “complete access to the audit work papers, audit personnel, and other information we need to inspect and investigate any firm we choose, with no loopholes and no exceptions.”
China had previously denied U.S. regulators routine access to such documents on the grounds of national security. In a departure from that justification, China’s stock regulator said last month that audit working papers generally don‘t risk exposing state secrets, individual privacy, companies’ vast user data or other sensitive information.
U.S. officials welcomed the change of tone but have questioned if China will follow through.
“I don’t know if the Chinese are going to comply,” Mr. Gensler said Thursday, even though he said officials from China’s Ministry of Finance directly told him in video calls that they intended to.
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