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'Significant issues remain' in reaching deal over U.S.-listed Chinese company audits -SEC official

05/25/2022 | 04:45am EDT
FILE PHOTO: Chinese and U.S. flags flutter outside the building of an American company in Beijing

WASHINGTON/HONG KONG (Reuters) - "Significant issues remain" in reaching a deal with China over a long-running dispute around auditing compliance of China-based companies listed on U.S. stock exchanges, a U.S. Securities and Exchange Commission (SEC) official said on Tuesday.

The SEC's international affairs chief, YJ Fischer, told an audience that the agency's accounting body, the U.S. Public Company Accounting Oversight Board (PCAOB), would need to complete China audit inspections by Nov. 22 to meet a U.S. deadline that will require noncompliant Chinese companies to delist by early 2023.

Fischer added that Chinese authorities should consider delisting from U.S. exchanges a "subset of issuers" that it deems "too sensitive to comply" with U.S. rules.

"While there has certainly been progress in the discussions on audit inspections in China and Hong Kong, significant issues remain," said Fischer. "Even if an agreement is signed between the PCAOB and Chinese authorities, it will only be a first step," she said, since the United States would then need to commence on-the-ground inspections.

Responding to Fischer's speech, the Chinese securities regulator said on Wednesday the two countries remain in close communication, and are committed to reaching a cooperative arrangement in line with legal and regulatory requirements.

The China Securities Regulatory Commission (CSRC) said in a statement that negotiations were progressing smoothly overall, and it was inappropriate to disclose specific issues.

"We've always maintained that the audit inspection issue should be solved by cooperation on the basis of equality. Our attitude has always been positive and constructive," the regulator said.

In December, the SEC mandated that Chinese companies listed on U.S. stock exchanges must disclose whether they are owned or controlled by a government entity, and provide evidence of their auditing inspections.

Under the rule, which implements a law passed by Congress in 2020, more than 200 companies - including Alibaba, Baidu Inc and Weibo Corp - could be kicked off U.S. exchanges if they are not compliant by the beginning of 2023.

Unlike many countries, China has not allowed the accounting regulator to inspect Chinese company auditors due in part to national security concerns. U.S. regulators worry the lack of U.S. oversight is putting investors at risk.

Several media outlets including Reuters had previously reported that there had been progress on the talks. While Fischer confirmed that, she warned time was nevertheless "running out" to reach a workable deal before next year.

(Reporting by Katanga Johnson in Washington and Xie Yu in Hong Kong; Editing by Michelle Price, Leslie Adler and Matthew Lewis)

By Katanga Johnson and Xie Yu

© Reuters 2022
Stocks mentioned in the article
ChangeLast1st jan.
ALIBABA GROUP HOLDING LIMITED -0.84% 119.12 Delayed Quote.0.28%
BAIDU, INC. -1.93% 147 Delayed Quote.3.67%
WEIBO CORPORATION -4.33% 22.97 Delayed Quote.-25.86%
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Sales 2022 130 B 19 309 M 19 309 M
Net income 2022 7 776 M 1 159 M 1 159 M
Net cash 2022 130 B 19 306 M 19 306 M
P/E ratio 2022 43,9x
Yield 2022 -
Capitalization 346 B 51 555 M 51 555 M
EV / Sales 2022 1,67x
EV / Sales 2023 1,34x
Nbr of Employees 45 500
Free-Float 77,1%
Duration : Period :
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Mean consensus BUY
Number of Analysts 33
Last Close Price 1 000,80 CNY
Average target price 1 353,07 CNY
Spread / Average Target 35,2%
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Managers and Directors
Yan Hong Li Chairman & Chief Executive Officer
Rong Luo Chief Financial Officer
Hai Feng Wang Chief Technology Officer
Shan Shan Cui Senior VP-Human Resources & Administration
Ji An Ding Independent Director
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