Although the U.S. government has threatened to “double audit” Chinese Listed Companies in the United States and claimed that Chinese companies that do not meet the regulatory requirements of the US side will be delisted by the end of 2021, according to the latest statistical data, Chinese enterprises have not been “scared”. Since the beginning of this year, the amount of IPO Financing of Chinese enterprises in the United States has reached 5.23 billion US dollars, more than double the same period last year. So why can’t the threat of pressure from Washington prevent Chinese companies from going public in the US?
first of all, the United States tried to set up “institutional barriers” for Chinese companies to go public in the United States or China capital stocks, which does not conform to the law of free flow of market resources.
we need to find out what the US side means by saying “we must comply with the relevant audit rules of us listed companies, otherwise we will be delisted”. At present, China capital stock is in line with the rules of the U.S. securities market, otherwise it will not be listed in the United States. Therefore, they should also comply with the audit rules of the U.S. securities market. So why does the U.S. government say it may not be compliant?
the reason is that China and the United States have some different arrangements in terms of audit supervision. According to the law of the United States, the listing of Chinese companies in the United States must be underwritten and audited by investment banks and accounting firms registered in the United States. Judging from the actual practice, the main audit services provided to China capital stock include PricewaterhouseCoopers, Deloitte, KPMG and Ernst & Young in China. They are all registered with the public company accounting oversight board (PCAOB) in the United States, which are in line with the audit rules of the United States.
However, according to China’s regulations and regulatory framework, the US side can not directly obtain the audit drafts of Chinese companies from these institutions, but through the regulatory cooperation mechanism between China and the United States. The US side can’t directly hold these audit papers in its hands. It has to let the US local accounting firms conduct the so-called “secondary audit”.
the author believes that these so-called new measures of the US side are not aimed at the quality problems of listed companies, but the long-standing dispute between “long arm jurisdiction” and “cooperative supervision” in the past, and political factors are attached. Of course, this will bring some obstacles to the listing of Chinese companies in the United States, but the impact is limited.
the listing of Chinese companies in the U.S. stock market is a specific action that follows the market rules and the other party’s legal rules. It not only involves financing, but also makes the dividends of China’s rapid economic development more easily “distributed” to the world through the globalized securities market. Listing in the United States not only realizes the demands of brand communication, financing and market expansion, but also brings high growth investment targets to investors in the United States and the world, which is win-win in essence.
facing the threat of delisting from the U.S. government, it is still a natural choice for the relevant Chinese companies to continue listing in the United States based on their own development needs. Most of them have set up a listing structure in the United States at an early stage, have signed agreements with relevant investment banks and accounting firms, and even entered the IPO process. If the listing place is changed, the operating cost may be greatly increased. In addition, it also reflects the trust of these companies in the market mechanism, and the expectation that the US stock exchange will still adhere to the “liberalizing office” under pressure. Those insightful people in the United States who really defend and follow the market principles, especially the securities market regulatory authorities, should really cherish this rationality of Chinese companies.
third, listing in the United States in a more severe atmosphere will also force the relevant Chinese enterprises to improve their awareness of abiding by laws and regulations, and improve their ability to carry out fair competition in a globalized environment. In this sense, it may be useful for the us to put pressure on China capital stocks. Of course, fundamentally speaking, what really benefits the interests of Chinese companies going to the United States and the U.S. market is that China and the United States can continue to strengthen cooperation in securities regulation and abandon unilateralism and pan politicization.
a very small number of scandals such as fraud in China capital stocks are also a market problem. All the listed companies in the United States have gone through the auditing procedures stipulated by American Law in advance, without exception. For the problems in the process of listing, the companies involved and their professional service agencies, as well as the regulatory authorities and exchanges in the United States should reflect on and bear certain responsibilities.
in the era of economic globalization, enterprises of one country should abide by the relevant laws and regulations of the two countries when conducting business or listing financing in the market of another country. Both regulators have the responsibility to effectively supervise the listed companies and professional service institutions, and effectively protect the legitimate rights and interests of investors. Only by strengthening regulatory cooperation between China and the United States can we effectively solve the problem and achieve effective supervision and win-win results for all parties. Taking advantage of this opportunity to politicize the market problems will not only help, but also create more secondary disasters.
the past practice has proved that a number of cooperation between Chinese and US regulators in the field of audit supervision of cross-border listed companies is beneficial to bilateral cooperation. The US side should give up the thinking of “long arm jurisdiction” and resolve their differences through consultation and negotiation in accordance with the idea of cooperative supervision, and do a good job in system convergence.