London Daily

Focus on the big picture.
Friday, Oct 09, 2026

China faces 'difficult set of choices' as it seeks to prevent its companies being delisted in the US

China faces 'difficult set of choices' as it seeks to prevent its companies being delisted in the US

The US wants full and unfettered access to the audits of US-listed Chinese companies, but China doesn't want US regulators unearthing state secrets as they poke around in the companies' financial affairs.

It was one of the few wrinkles during what was an exceptional year for Wall Street.

Just days after the Chinese ride-hailing app Didi made its stock market debut, in what was the biggest flotation of a Chinese company since Alibaba in 2014, Beijing launched a crackdown on its tech sector.

Shares of Didi and other Chinese tech companies fell sharply and investor confidence was severely rattled.

Amid a general deterioration in Sino-US relations, tensions flared in particular over a law passed by US Congress in May 2020, under which the Securities & Exchange Commission (SEC), the top US financial regulator, would be allowed to delist Chinese companies from US exchanges if American regulators were not allowed to review the audits of such companies for three consecutive years.

The legislation, which was written by both Republican and Democrat senators, was passed following a series of accounting scandals involving Chinese companies, most famously Luckin Coffee, which was forced to delist from the Nasdaq in April 2020 after admitting it had fabricated more than $300m worth of sales.

There is likely to be particular sensitivity around Chinese tech companies like Baidu


The law casts doubt on the ability of Chinese companies to raise as much money by listing on US stock exchanges as they have in the past. A number of big US-listed Chinese names, including Alibaba, Weibo and Baidu, responded by taking a dual listing in Hong Kong.

Forcing such companies to delist would also have huge ramifications for investors. Some 273 Chinese companies are listed in the US and they are worth a total of more than $2trn.

The SEC upped the ante last month by publishing a list of 11 Chinese companies - among them big names like Baidu, BeiGene and Yum China - that it said were in danger of being de-listed under the new law. Shares in all of the companies named fell on the news, with Baidu, the internet giant, coming off by 8%. BeiGene, a biotech company working on cancer treatments, saw its shares fall by a fifth.

But now peace is threatening to break out.

On Thursday, the China Securities Regulatory Commission (CSRC) said it had held several rounds of meetings with US regulators and that both sides had a "willingness" to solve the row. A day later, it told CNBC it had convened a meeting last week with some accounting firms and had told them to consider preparing for joint inspections.

It followed this up on Saturday by pledging to change confidentiality laws preventing its companies listed overseas from providing financial information to foreign regulators. The compromise is expected to do away with Beijing's current insistence that Chinese companies listed overseas can only be inspected on the ground by Chinese regulators.

It suggested this could include joint inspections by both Chinese and foreign regulators - provided companies took care not to disclose any state secrets to which they were party to the latter.

The news was enough to spark a rally in shares in Hong Kong on Monday and is expected to do the same when Shanghai reopens after a public holiday later on Monday.

Alvin Tan, an analyst with Royal Bank of Canada in Hong Kong, said: "[It] represents a major concession on the long-running dispute."

Janet Mui, head of market analysis at the wealth management firm Brewin Dolphin, added: "This lowers delisting risk, which is a key concern for investors."

News of a possible compromise sparked a rally on the Hong Kong Stock Exchange


The big question is whether the compromise offered by the CSRC will be enough to satisfy its US counterpart. It is, for example, quite clear from what it has offered that Beijing is anxious about the prospect of US regulators unearthing state secrets as they poke around in the affairs of US-listed Chinese companies. There is likely to be particular sensitivity around Chinese tech companies like Baidu.

That may not be enough to satisfy the SEC if it wants American regulators to have full and unfettered access to the audits of US-listed Chinese companies.

Gary Gensler, the SEC chairman, admitted as much when, in an interview at the weekend, he said: "It's up to the Chinese authorities and, frankly, it could be a difficult set of choices for them."

He noted that audits seldom contain confidential state secrets.

So there is still plenty that can go wrong here. The Chinese will argue that US-listed Chinese companies must not be forced to give up state secrets. The US will argue that its regulators cannot have full confidence in the audits of US-listed Chinese companies if parts of those audits are redacted.

It may all boil down to whether both sides can agree on whether some material can be withheld and what kind of material is deemed sufficiently sensitive to be withheld.

A compromise would be in the interests of both investors and the companies themselves. In the meantime, though, the only winner would appear to be the Hong Kong Stock Exchange.

Newsletter

Related Articles

0:00
0:00
Close
UK and Germany Finalize Kensington Treaty to Strengthen Defense and Technology Cooperation
Britain Maintains Diplomatic Mission in East Jerusalem Despite Israeli Closure Deadline
English Councils Push Government to Rethink Proposed Funding Cuts
Scottish Homebuilding Falls to Lowest Level in 11 Years
BBC Chief Matt Brittin Defends Restructuring as Staff Challenge Job Cuts
UK Finance Warns High Energy Costs and Bond Yields Are Complicating Fiscal Outlook
UK Adopts All 44 Recommendations on Regulating AI in Healthcare
Chancellor John Healey Prepares Autumn Budget as Borrowing Costs Strain Public Finances
UK Investigators See Strong Indications of Iranian Link After RAF Fairford Security Operation
Laura Trott Pledges Tighter Controls on Political Activism in UK Classrooms
Welsh Ministers Launch Long-Term Review of North Wales and Anglesey Crossings
Welsh Government Orders 18-Month Study of Road Solutions Around Newport
Reform UK MP Sarah Pochin Faces Scrutiny Over £800,000 Second Home Purchase
British Households Grow More Concerned About Fuel and Energy Prices
NHS Leaders Warn of Rising Winter Pressure on Emergency Departments
Kemi Badenoch Proposes £2.3 Billion Employer National Insurance Cut for Young Workers
Middle East Conflict Could Erase UK Fiscal Headroom, Economists Warn
Manchester City Found Guilty of Multiple Premier League Financial Rule Breaches
UK Security Services Find Strong Indications of Iranian Role in RAF Fairford Incident
Costa Coffee Returns to Operating Profit on Iced Drinks and Menu Changes
Asos Warns Customers After Unauthorized Access to Retail App and Data
Kemi Badenoch Puts Growth and Deregulation at Center of Conservative Conference
Campaigners Warn of Deepening Social Care Crisis for Disabled Adults
Study Finds Rising Early-Onset Cancer Rates Among Adults Under 50 in Britain
UK Coach Operators Warn High Diesel Prices Could Force Route Cuts
FCA Opens Independent Review Into Handling of Epstein-Linked Whistleblower Case
Argentina Vows to Block Falkland Islands Offshore Oil Development
UK Chancellor Prepares Fiscal Measures and Welfare Reforms Ahead of Autumn Budget
Sainsbury’s and Morrisons Explore Potential Multi-Billion-Pound Merger
UK Weighs Tariffs on Chinese Electric Vehicles to Align With European Union
UK Threatens Diplomatic Expulsions Over Planned Closure of East Jerusalem Consulate
UK Energy Price Cap Hits Three-Year High as Middle East Conflict Raises Costs
Seventh Arrest Made in Suspected Terror Plot at RAF Fairford
Systemic Education Collapse Sparks Mass Student Uprisings in France
Green Party Faces Backlash Over Resolution Equating Zionism With Racism
Conservatives Debate Scrapping Environmental Rules for New Homes
Cornwall Insight Warns UK Energy Bills Could Approach £2,000 This Winter
UK Coach Operators Warn of Service Cuts as Diesel Prices Exceed £2
Scottish Parliament Approves £68 Billion Budget With New Tax and Property Measures
FCA Opens Independent Review Into Handling of Epstein Whistleblower
UK Government Drops Plan to Suspend Jury Trials in England and Wales
Bank of England Holds Interest Rate at 3.75% as Markets Watch November
Two Iranian Nationals Charged Over Alleged Plot Targeting Manchester Jewish Community
UK Fiscal Headroom Halves to £11 Billion Ahead of Budget, EY Warns
US Bomber Withdrawal From RAF Fairford Prompts UK Security Review
Sarah Wakfer Appointed Chair of Northern Ireland’s Health and Care Regulator
Scotland Housing Completions Fall to 11-Year Low Amid National Shortage
UK Water Companies Face Tougher Oversight and Unannounced Regulatory Inspections
Middle East Conflict Pushes UK Fuel and Wholesale Energy Prices Higher
Andy Burnham Raises Prospect of Second Brexit Referendum in Review of UK-EU Relations
×