Will China Concede Accounting Supervision Rights Over Its Overseas-Listed Domestic Companies?

China Securities Regulatory Commission to Revise Accounting Rules for Overseas Listed Companies
Reamendment of 2019 Securities Law Amid US Capital Market Delisting Threat

[Asia Economy International Department Reporter] China, facing the risk of being delisted from the U.S. capital market, has initiated revisions to the accounting regulations for overseas listed companies.

[Image source=Yonhap News]

The China Securities Regulatory Commission (CSRC) announced on the 2nd through its website that it will partially amend the "Regulations on Strengthening the Security and Record Management of Overseas Securities Issuance and Listing" (hereinafter referred to as the Regulations) and has begun collecting public opinions.

The main point of the amendment is to delete the provision stating that "on-site inspections of Chinese companies listed overseas should mainly be conducted by Chinese supervisory and regulatory authorities or rely on the inspection results of Chinese supervisory and regulatory authorities," the CSRC explained.

Foreign media interpreted this move as showing China's willingness to make some concessions in the long-standing U.S.-China conflict over accounting supervision rights of Chinese companies listed on the New York Stock Exchange.

In 2019, China amended the Securities Law to explicitly prohibit domestic companies from voluntarily submitting accounting data to foreign authorities without government approval.

The U.S. responded with the Holding Foreign Companies Accountable Act (HFCAA). Enacted in 2020, the HFCAA stipulates that companies unable to prove they are not controlled by foreign governments or that fail to pass audits by the Public Company Accounting Oversight Board (PCAOB) for three consecutive years cannot be listed in the U.S.

The U.S. Securities and Exchange Commission (SEC) finalized the delisting rules for Chinese companies under the HFCAA in December last year. According to the SEC, 273 Chinese companies are at risk of delisting.

As a result, the stock prices of Chinese listed companies plummeted on both the U.S. and Hong Kong stock exchanges, prompting the Financial Stability and Development Committee of the State Council of China to announce that "good communication is ongoing between the supervisory authorities on both sides and active progress has already been made," signaling the move to amend related regulations.

This content was produced with the assistance of AI translation services.