Chinese securities regulator responds to new SEC rules on listing in U.S.
CSRC again denied report that Beijing plans to ban IPOs in U.S. via VIE
The China Securities Regulatory Commission (CSRC) just put out the following statement on its website on Sunday, Dec. 5 afternoon, in apparent response to the adoption of final amendments to the U.S. Securities and Exchange Commission rules implementing the Holding Foreign Companies Accountable Act of 2020 (HFCAA), as well as the press report that China is planning to ban companies from going public on foreign stock markets through variable interest entities (VIEs).
This translation has NOT been approved by CSRC.
Question: Recently, the U.S. Securities and Exchange Commission (SEC) announced the implementation rules of the Holding Foreign Companies Accountable Act of 2020 (HFCAA), and individual company/companies announced the beginning of delisting from the U.S., which has aroused widespread concern in the market. What is the CSRC's comment on this? What are your views on the cooperation between the U.S. and China in audit oversight, as well as the next step for domestic enterprises to list in the U.S.?
Answer: We have taken note of the situation and the concerns in the market about the cooperation between the U.S. and China in audit oversight and the prospects of enterprises listing in the U.S. The CSRC and relevant regulatory authorities have always been open to enterprises' choice of overseas listing venues, and fully respect enterprises' independent choice of listing venues in accordance with the law and compliance. Recently, individual media reported that Chinese regulators will prohibit the overseas listing of enterprises with VIE structure and promote delisting of Chinese enterprises listed in the U.S. This is a complete misunderstanding and misinterpretation. We understand that some domestic companies are actively communicating with domestic and foreign regulators to pursue listings in the U.S.
In terms of U.S.-China audit oversight cooperation, recently, the CSRC and the SEC, the U.S. Public Company Accounting Oversight Board (PCAOB), and other regulators have had frank and constructive communication on resolving problems in cooperation, and positive progress has been made in advancing cooperation on some key matters. We believe that as long as the regulators of both sides continue to uphold this principle of mutual respect, rationality, pragmatism, and professional mutual trust in their dialogue and consultation, a mutually acceptable path of cooperation can be found. In fact, China and the U.S. have been cooperating in the field of audit oversight of Chinese companies listed in the U.S., and have also explored effective ways of cooperation through pilot inspections, laying a relatively good foundation for cooperation between the two sides. However, some U.S. political forces have politicized capital market regulation in recent years, suppressing Chinese companies listed in the U.S. for no reason and coercing them to delist, which is not only contrary to the basic principles of market economy and the rule of law but also detrimental to the interests of global investors and the international status of the U.S. capital market, which is a "lose-lose" approach that benefits no one. In today's highly globalized capital market, it is all the more important for regulators to deal with audit oversight cooperation in a pragmatic, rational, and professional manner, and forcing Chinese companies listed in the U.S. to delist should not be a responsible policy option.
For some time now, relevant Chinese regulators have introduced a series of policy measures to promote the regulated development of the platform economy, the main purpose of which is to regulate monopolistic behavior, protect the rights and interests of small and medium-sized enterprises, data security, personal information security, eliminate the financial regulatory vacuum, and prevent disorderly capital expansion. In response to these new issues and tests, regulators in various countries are also trying to adopt different regulatory measures to promote a healthier and more sustainable development of the platform economy. Therefore, the relevant policies introduced by the Chinese government are not suppression of specific sectors or private enterprises, nor are they necessarily related to the overseas listing activities of enterprises.
In the process of implementing the relevant regulatory measures, the relevant Chinese regulatory authorities will unswervingly promote reform and opening up, adhere to the "two unwavering", handle the relationship among investors, enterprises, and regulators in an integrated manner, and further improve the transparency and predictability of the policy measures. The CSRC will also continue to maintain frank communication with its U.S. regulatory counterparts and strive to resolve the remaining issues in audit oversight cooperation as soon as possible.