An American accounting board has started what could prove to be a three-year clock for the delisting of many Chinese companies traded on American stock exchanges, in a move involving audit standards that are at the center of a squabble between Beijing and Washington.
The move comes as some Chinese companies have already begun seeking listings on stock markets in mainland China or Hong Kong instead of New York in response to demands from Beijing for greater control of potentially sensitive data. Didi Chuxing, the Chinese ride-hailing giant, said two weeks ago that it would delist from the New York Stock Exchange, and now plans a listing in Hong Kong instead.
But Chinese regulators have wanted to preserve American stock listings as an option for Chinese companies that are not involved in potentially sensitive political or national security issues. The latest dispute over accounting could make that more difficult.
The Public Company Accounting Oversight Board said late Thursday that it had been unable to fully inspect the audit papers and other documents of accounting firms in mainland China and Hong Kong. The Securities and Exchange Commission has the power to delist companies that lack fully approved overseas audits for three years.
The board said that in the 13 months through the end of September, 15 accounting firms registered with the board and based in mainland China or Hong Kong had signed the audit reports for 191 publicly traded companies with a combined global market capitalization of $1.9 trillion.
The United States and China have been arguing about the audit issue for more than a decade. The China Securities Regulatory Commission has contended over the last several years, most recently in a statement on Dec. 5, that it is prepared to cooperate with the United States and reach a series of agreements that protect investors while also shielding China’s security and other interests.
The American accounting board, a nonprofit corporation that works closely with the S.E.C., disputes that China has shown flexibility. “They persistently have taken positions that prevent the finalization of, or their full performance under, such agreements,” the board said.
The Chinese commission had no immediate reaction on Friday. Chinese state-owned media groups were silent on the board’s decision.
Li You contributed research.
