US-China Talks on Delistings Advance With H.K. Inspections

(Bloomberg) -- Talks between Beijing and Washington to avoid the delisting of about 200 companies from New York stock exchanges are gathering pace with a plan to let US inspectors travel to Hong Kong to review audit documents of Chinese businesses.

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Chinese regulators have instructed major accounting firms to prepare to bring the audit work papers of US-listed Chinese companies to Hong Kong, where they can be reviewed by the Public Company Accounting Oversight Board, according to a person who asked not to be identified as the discussions are private. The conversations, which remain ongoing, could result in a significant advance in a years-long standoff over the inspections, which are required for all firms that trade in the US.

The clock is ticking to avoid a congressionally imposed deadline of 2024 for kicking out businesses that don’t comply from the New York Stock Exchange and Nasdaq. The Nasdaq Golden Dragon Index, which tracks Chinese firms trading in the US, surged the most in more than two months after The Wall Street Journal reported on the discussions earlier Thursday.

The PCAOB declined to comment. The China Securities Regulatory Commission and the US Securities and Exchange Commission didn’t immediately respond to requests for comment.

The SEC has remained unwavering in its demand that US regulators get full access to the audits. SEC Chair Gary Gensler has said that US law gives him little room for compromise.

(Updates with SEC stance in fifth paragraph)

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