Posted Apr 4, 2022, 6:11 PMUpdated on Apr 4, 2022, 6:28 PM
Beijing seems ready to let go so as not to cut itself off from Wall Street. Chinese stock exchange authorities on Saturday relaxed the rules governing the audits of companies listed abroad. An unprecedented concession from China, announced in the hope of removing the risk of delisting Chinese companies listed in the United States.
This gesture of appeasement was welcomed with relief by American investors. The Nasdaq Golden Dragon index, which includes most Chinese companies listed on Wall Street, has jumped more than 12% since Friday and the first press rumors about it.
The Chinese tech giants have largely benefited from this improvement. Alibaba recovered 8% in two sessions, while JD. com climbed 10% and the Baidu search engine nearly 15%. Marketplace Pinduoduo has jumped more than 20% since Friday and streaming site Bilibili by 25%.
The American financial market policeman, the SEC, has been threatening Chinese companies listed in the United States for several weeks with delisting by 2024, in application of a law imposing an audit of accounts by an approved firm. by the Accounting Supervisory Board for Listed Companies (PCAOB). After the vote on this law at the end of 2020, a showdown began between the American and Chinese authorities, the latter refusing for a long time to open the accounts of their companies to foreign authorities.
The Chinese stock market regulator, the CSRC, finally proposed on Saturday to put an end to the obligation to have the accounts of Chinese companies audited by local supervisory bodies for groups listed abroad. To deal with requests for investigation from foreign authorities, he intends to develop a “cooperation mechanism”. Certain sensitive data for national security would however be excluded from this framework.
The SEC is leading the charge
Whether this first concession to US demands will be enough to appease US regulators remains to be seen. SEC Chairman Gary Gensler has recently stepped up criticism of China, the only jurisdiction with Hong Kong to refuse to comply with US demands.
Last week, he stressed that US law applied to countries, not specific groups. In other words, if a single US request were to be rejected in the future, all Chinese companies would be threatened with exclusion. More than 200 Chinese companies are now listed in New York, and the vast majority of them have always refused to open their accounts to PCAOB inspectors, including Alibaba and Baidu.