The amendment might allow US regulators to inspect audit reports of Chinese companies listed in New York. That could end a dispute between the two countries that threatened more than 200 Chinese firms with possible expulsion from the New York Stock Exchange or Nasdaq.
In the new draft rule published Saturday, the regulator struck out a requirement that examination of the financial documents of overseas-listed Chinese firms must be “mainly conducted by Chinese regulatory agencies.”
Instead, it says that inspections shall be “conducted through cross-border regulatory cooperation,” and the CSRC will provide assistance during the process.
The CSRC also said that all companies listed overseas will be responsible for properly managing confidential and sensitive information and protecting national security.
The draft rule has been issued for public consultation until April 17.
“The revision could potentially offer a long-term solution to the disputes on the audit requirement between China and the US, reducing the delisting risk of Chinese companies from US exchanges,” wrote Ken Cheung Kin Tai, chief Asian FX strategist at Mizuho Bank, in a note on Monday.
US regulators have long complained about the lack of access to the books of Chinese companies. But Beijing, citing national security concerns, has resisted such scrutiny. It requires companies that are traded overseas to hold their audits in mainland China, where they cannot be examined by foreign agencies.
In late 2020, the Holding Foreign Companies Accountable Act was signed into law, giving the Securities and Exchange Commission power to kick foreign companies off Wall Street if they fail to allow US regulators to review their audits for three straight years.
Chinese tech stocks rebound
The Nasdaq Golden Dragon China Index, a popular index that tracks more than 90 Chinese companies that are traded in the United States, lost a quarter of its value within four trading sessions last month.
Markets welcomed the CSRC amendment, with Chinese tech stocks rallying in Hong Kong.
“The overhang on US-listed Chinese companies was partially removed,” said Mike Shiao, chief investment officer for Asia (excluding Japan) at Invesco.