Chinese mouthpiece Global Times lauds the inking of US-China audit deal

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A day after China and the US signed a pact that will allow US authorities to inspect the accounting books of Chinese companies listed on the US stock exchange, Beijing’s mouthpiece Global Times applauded the move. 

Reportedly, in an editorial titled ‘Audit oversight agreement of US-listed Chinese companies a symbolic case of China-US cooperation’ the publication dubbed the signing of the pact as ‘an important step forward.’

It further added that the signing of the pact should serve as a lesson on how to deal with potentially sensitive issues.

“The fact that China and the US reached a cooperation agreement on audit oversight provides a useful lesson for the current bilateral relationship — the two countries can reach a solution that addresses each other’s concerns on some critical and sensitive issues, as long as they adhere to the principle of reciprocity and mutual benefit,” read the editorial.

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As reported by WION, the signing of the pact came as a relief to hundreds of Chinese businesses, investors, as well as Wall Street. As per data, 61 Chinese companies are currently listed in the US, with a total market capitalisation of about $1.3 trillion.

Wall Street did not want to lose out on such a humongous piece of the money pie and thus lobbied hard with the government to reverse some of the strict Trump-era policies.

If the policy goes through as planned, China will have the opportunity to continue accessing the deepest capital markets in the world.

Why did Chinese companies not share their books?

It is pertinent to note that for a long time, experts believed that the Chinese Communist Party (CCP) did not allow Chinese companies to share their account books with overseas audit agencies. 

Access to books has been a major bone of contention between Washington and Beijing. When Donald Trump was in power and amidst a major trade war with China, he employed the strategy of opening ‘books’ to pin down China. 

American regulatory watchdog Public Company Accounting Oversight Board (PCAOB) has the power to audit such companies. However, if the watchdog is not able to access the books for a period of three years, the company stands to be de-listed from the stock market.

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The refusal to reveal the books threatened the future of big tech Chinese companies such as Alibaba, JD.Com Inc, and NIO INC among others. 

However, SEC Chair Gary Gensler added a word of caution that the success of the policy will only depend on PCAOB receiving the books.

“Make no mistake though: The proof will be in the pudding. This agreement will be meaningful only if the PCAOB actually can inspect and investigate completely audit firms in China,” said Gensler.

(With inputs from agencies)

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