The U.S. and China have reached a tentative agreement to allow U.S. regulators to inspect the audits of Chinese companies whose stocks are traded on U.S. exchanges. In a long-festering dispute, U.S. regulators have threatened to boot a number of Chinese companies off the New York Stock Exchange and the Nasdaq if China didn’t permit inspections.
The deal announced Friday by market regulators in the U.S. and China is preliminary, and Securities and Exchange Commission Chairman Gary Gensler said “The proof will be in the pudding.”
“While important, this framework is merely a step in the process,” Gensler said in a prepared statement. “This agreement will be meaningful only if (U.S. regulators) actually can inspect and investigate completely audit firms in China. If (they) cannot, roughly 200 China-based issuers will face prohibitions on trading of their securities in the U.S. if they continue to use those audit firms.”
