Chinese Regulator to Cooperate with US on Audit Supervision

Securities regulator to create conditions for China-US cooperation on audit supervision, strengthen market communication, and stabilise policy expectations.

The CSRC (China Securities Regulatory Commission) has said in its mid-year regulatory work conference that China will roll out a raft of policy measures to further open up its capital market.

The measures include efforts to create the conditions necessary to facilitate China-US cooperation on audit supervision.

To date, US regulators have not had the ability to inspect the financial audits of its Chinese companies listed in the US, as Chinese law bars financial institutions, accounting, audit and legal firms from providing any securities-related documents to foreign parties without permission.

US regulators have proposed that Chinese companies should be delisted if they do not comply with PCAOB (Public Company Accounting Oversight Board) auditing standards. In May, the PCAOB proposed a framework for consultation setting out how this would work in practice.

At the work conference, the CSRC said it will create conditions to promote China-US cooperation on audit supervision, strengthen market communication, and stabilise policy expectations and its institutional environment.

The regulator also said it would deepen the interconnection between the Mainland and Hong Kong markets, and support the stable development of the Hong Kong capital market.

Other measures include plans to reform the IPO registration system to optimise the issuance pricing mechanism, improve the quality of prospectus disclosures, further clarify the responsibilities of intermediaries, and improve anti-corruption mechanisms.

The CSRC has reiterated a pledge to implement a “zero tolerance” policy towards illegal activities in the capital market, including financial fraud, illegal guarantees, market manipulation, and insider trading.

The regulator also said it will continue its work to prevent and resolve major financial risks and maintain market stability, including in key areas such as private equity funds and bond defaults.

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