File photo: VCG

China welcomes the latest progress made in China-US audit oversight cooperation, which proves that "a practical path for cooperation that accommodates the legal and regulatory requirements in both jurisdictions" can certainly be found as long as both sides work together with mutual respect, professionalism and pragmatism, China's securities regulator said on Friday.

The comment comes after the US accounting watchdog announced on Thursday that it was able to completely inspect and investigate the accounting firms headquartered in the Chinese mainland and Hong Kong in 2022, and had thus moved to vacate some of its previous determinations, which claimed that it was unable to inspect or investigate those firms in China, according to a statement rolled out by the United States Public Company Accounting Oversight Board (PCAOB).

Industry observers said the decision sent a positive signal that the risk of over 200 Chinese companies being forced to delist from US stock exchanges has been partly removed, at least for the short term, after both sides reached an audit cooperation agreement in August.

The result underscores the rooms for the world's two largest economies to carry out win-win cooperation based on the principle of equality and reciprocity, which is beneficial to stabilizing markets and protecting investors' rights, industry insiders said.

But they nevertheless warned that uncertainties over the prospect of auditing cooperation still remain, amid a growing number of long-arm jurisdiction schemes launched by the Biden administration that step up the crackdown against various sectors of the Chinese economy, which could potentially turn the US' advantageous financial and capital industry into a tool to be abused.

"We welcome the PCAOB's decision to vacate its previous determinations based on professional and regulatory considerations, and look forward to building on previous experience and carrying out audit oversight cooperation with US counterparts in the years to come with enhanced mutual respect and trust," the China Securities Regulatory Commission said in a statement posted on the regulator's website.

The statement noted the cooperation will establish long-term and sustainable cooperation arrangements, which will enhance the stability and predictability of international regulatory environment and better protect global investors.

According to the statement, the US has gained access to auditing documents of Chinese companies through Chinese regulatory authorities, and carried out interviews with accounting firms' employees with the participation and assistance of the Chinese side.

On the basis of abiding by laws and international practices, the Chinese side also provided specific processed data of the auditing paper such as personal information in accordance with the agreement, which not only ensures that both sides perform their supervisory duties but also meets with relevant laws and regulations on information security protection.

Dong Shaopeng, a senior research fellow at the Chongyang Institute for Financial Studies at Renmin University of China, told the Global Times on Friday that the positive progress on bilateral auditing cooperation based on an equal footing is beneficial for both sides, and shows that China and the US have great room to strengthen cooperation in capital market connectivity.

"But it cannot be ruled out that the US will further leverage its financial and capital resources to curb China, a trend that Chinese companies should still take note of in seeking overseas listings," Dong said.

The PCAOB stressed that this is the beginning and not the end of their investigation work in China, nor should the statement be misconstrued as a clean bill of health for firms in Chinese mainland and Hong Kong. "Our teams are already making plans to resume regular inspections in early 2023 and beyond, as well as continuing to pursue investigations," the statement read.

Dong said the bilateral audit cooperation will proceed forward as long as the US returns to the normal track of handling country-to-country relations, but there will be certain levels of disputes if Washington continues its long-arm jurisdiction practice.

Dong Dengxin, Director of the Finance and Securities Institute of the Wuhan University of Science and Technology, told the Global Times on Friday that considering the highly politicized capital market in the US, Chinese companies need to speed up transitioning to alternative capital markets as a back-up plan.

To date, a number of Chinese companies including Shanghai-based Will Semiconductor Co, Shenzhen-based Eastroc Beverage, heavy equipment multinational Sany Heavy Industry Co and medical equipment maker Lepu Medical Technology, have announced that they will list on the SIX Swiss Exchange by issuing Global Depositary Receipts. Other Chinese companies such as Alibaba and JD.com have also been picking up the homecoming momentum, either to the Chinese mainland or Hong Kong bourses.