People’s Republic of China government securities regulators are offering a change to PRC securities laws that would remove a requirement that
audit inspections of overseas-listed Chinese companies be done mainly by Chinese regulators.
Another part of the PRC regulators’ offer:
Under the draft rules, the burden of protecting state secrets now falls to private companies as well. They have to report to the financial watchdog and other authorities before cooperating with overseas regulators.
Far from being a serious offer, this is insulting.
PRC regulators of companies possessing PRC state secrets—or held to possess them by the PRC government—will have too easy a time using the secrets excuse to delay, obfuscate, or outright censor any effort at an audit.
Audits not being done “mainly” by PRC regulators are not the same as agreeing to let host nation auditors—American auditors in our case—have full, complete, open access to PRC company books immediately on request, including no-notice requests.
Anything less is too much interference with the audits of companies listed on our exchanges, whether foreign companies are PRC-domiciled or elsewhere.
The SEC must not take this move by the PRC seriously.