• Military

• WMD Menu                           

• Introduction
• Systems
• Facilities
• Agencies
• Operations
• Countries
• Hot Documents
• News
• Reports
• Policy
• Budget
• Congress
• Links

• Intelligence
• Homeland Security
• Space

Experts warn of further crackdown measures if US exits audit deal with China

Global Times

Source: Global Times Published: 2020/7/14 23:27:16

The US government reportedly plans to scrap a 2013 agreement between the US and Chinese auditing authorities, a move that could foreshadow a more direct crackdown on Chinese firms listed in US stock markets.

Experts warned that Chinese companies listed in the US could face stricter management from US regulators, and it's possible that some mainland-based firms may be forced to delist from the US market as a result of increasingly tense China-US relations.

According to a Reuters report on Tuesday, the 2013 agreement allows the US auditing watchdog to seek documents in enforcement cases against Chinese auditors, but the US side decided to exit from the deal because US regulators said many such requests were rejected by China, meaning they have scant insight into audits of Chinese firms that trade on US markets.

The report cited a US government official as saying that the action is imminent, and that the US made the decision because of the need to protect American shareholders.

However, Thomas Yeung, vice dean of the Futian School of Finance and an expert based in Hong Kong, said that the move is based on political reasons instead of the so-called regulatory needs, given that the Hong Kong stock market, which has even stricter IPO rules than the US, didn't have problems supervising relevant mainland companies' IPOs in Hong Kong.

Leaving the agreement would not directly influence the listed status of Chinese companies that trade on US exchanges, but it shows a "growing frustration" among US authorities over Chinese companies' lack of transparency, which could lead to a more direct crackdown on Chinese companies listed in the US, Reuters noted.

Such matters reflect a trend that the US aims to have a tighter grip on Chinese companies via financial means, under the US general strategy of suppressing the Chinese economy, experts said.

"It's very likely that the US will find some means, technical rules for example, to crack down on Chinese companies listed in the US. Some firms might be forced to delist," Xi Junyang, a professor at the Shanghai University of Finance and Economics, told the Global Times on Tuesday.

US companies might also target listed mainland companies that have business links with the Chinese government, or those who have used the services of mainland financial intermediaries in their IPO, Xi said.

Thomas also said that Chinese companies' choice of market will depend on how local regulators view sustainable corporate development.

In the short term, mainland companies listed in the US might have to tolerate the US' unreasonable requirements, but as the political risks of listing in the US are expanding and as restrictions accumulate on the US side, some Chinese companies might delist or withdraw capital from the US markets in the long run, Yang said.

"For industrial giants like Alibaba, they might also choose to delist, as larger companies are likely to be burdened with more risk uncertainties in a chaotic and hostile environment (like the US)," he said.