US and Chinese Officials in negotiations regarding the delisting risk of 200 Chinese stocks, report

Written by Cláudio Afonso | [email protected] | LinkedIn | Twitter

According to Bloomberg citing people familiar with the matter, U.S. and Chinese officials were in negotiations during the first days of the month in order to reach a deal about the U.S.—delisting risk of 200 Chinese stocks. Some of the biggest names on the list are PinDuoDuo, JD.com, Alibaba, NIO, Netease, XPeng, and Baidu.

U.S. Public Company Accounting Oversight Board (PCAOB) and the China Securities Regulatory Commission and the Ministry of Finance held calls last week with the negotiations “reaching a critical point”. Bloomberg added that the “redactions in auditors’ documents are a key barrier” to reach a deal.

“PCAOB continues to hold regular conversations with the PRC authorities about multiple outstanding issues as we work to protect investors and meet our mandate under U.S. law,” said Kent Bonham, a spokesperson for the agency. “Any speculation about a final agreement remains premature, and as Chair Erica Williams has said, ‘Time is of the essence.’”

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In early May, US SEC updated the Holding Foreign Companies Accountable Act (HFCAA) list adding NIO, XPeng and many other Chinese companies. According to the law approved in late 2020, the companies on the list used an auditor “whose working paper cannot be inspected or investigated completely by the PCAOB”. Previously, on April 22, also the Chinese automaker LI Auto was added to the HFCAA list.

Last May — when the Chinese EV maker NIO and XPeng were added to the list — NIO answered saying it will “continue to comply with applicable laws and regulations in both China and the United States” and also “strive to maintain its listing status on both the NYSE and the HKEX in compliance with applicable listing rules”.

Under the HFCAA, the PCAOB has the responsibility for determining that it is unable to inspect or investigate completely a registered public accounting firm or a branch or office of such a firm because of a position taken by an authority in a foreign jurisdiction. The Commission’s role at this stage of the process is solely to identify issuers that have used such PCAOB-identified public accounting firms to audit their financial statements, SEC says.

Written by Cláudio Afonso | [email protected] | LinkedIn | Twitter