China, US ‘willing’ to solve audit dispute, but wisdom needed: CSRC
Published: Mar 31, 2022 09:53 PM
A 7 foot-tall statue of gorilla Harambe faces off with the

A 7 foot-tall statue of gorilla Harambe faces off with the "Charging Bull" statue in the Wall Street area in Manhattan, New York on Tuesday. Approximately 10,000 bananas were also placed around the bull statue as part of the protest against the gap between the rich and the poor. Photo: IC

China's top securities regulator said on Thursday that Chinese and US regulators are willing to solve differences on audit dispute regarding US-listed Chinese companies, but the final outcome of the talks depends on the wisdom and sincerity of both sides.

The comment came after the US on Wednesday added five Chinese companies, including Baidu, iQIYI and Futu Holdings, to a list of companies that could face delisting from the US. This marks the third batch of Chinese firms added to the list in a month, bringing the total number of Chinese firms on the list to 11.

Some companies on the list on Thursday sought to reassure investors that the move does not necessarily mean imminent forced delisting. Futu said in a statement that being on the provisional list for delisting does not mean a forced delisting in the near future. Separately, iQIYI also said that the company is actively seeking solutions.

In a statement on Thursday, an official with the China Securities Regulatory Commission (CSRC) said it has learned from US regulators that the addition of some Chinese firms to the list is a "normal" procedure. 

"Whether the companies will actually face delisting in the next two years will ultimately depend on the progress and results of China-US audit and supervision cooperation," the CSRC official said.

The CSRC official noted that regulators on both sides have engaged in thoughtful, respectful and productive talks. "Both sides are willing to resolve differences and problems, and the final result depends on the wisdom and sincerity of both sides," the official added.

On Wednesday, the US Securities and Exchange Commission (SEC) added five companies - Baidu, Futu Holdings, Nocera, iQIYI and CASI Pharmaceuticals - to a growing list of companies for possible delisting.

The firms face removal if they fail to comply with the requirement to grant access to audit work papers to US regulators for three straight years, meaning they could be delisted as early as 2024.

The overall risk of immediate delisting facing Chinese companies has been alleviated with the continued talks between the regulators, but some negative sentiment is still weighing down the market, Dong Shaopeng, a senior research fellow at the Chongyang Institute for Financial Studies at Renmin University of China, told the Global Times on Thursday.

"The practice of the US announcing additions to the list from time to time is very harmful to the market. It has not only interfered with the market sentiment of Chinese concept stocks, but also damaged the credibility of the US market," Dong said.

Deng Zhidong, an economist who closely follows the capital market, said that the new additions, which came one week after the SEC put Chinese social media platform Weibo on the possible delisting list on March 23, shows the US' accelerated pace to put pressure on China.

"It is likely that more stocks will be put on the list," Deng said, noting that companies might be considering alternatives to US listings given the rising risks.

Ding Jihua, a chief compliance consultant at Beijing Danhuasheng Management Consulting Co, said that there is also a certain foundation for the regulators to reach a deal.

"US-listed Chinese companies have high profitability, which can allow US investors to enjoy the dividends of China's development. From a regulatory perspective, the CSRC has also been promoting the transparency of listed companies, strengthening information disclosure, and cracking down on financial fraud," Ding said.