Sources: the US and China are nearing a deal to let American regulators travel to Hong Kong and audit US-listed Chinese companies, including Alibaba and Baidu
Agreement could prevent many Chinese companies from being delisted from American stock exchanges Tweets: @qizhai Tweets: Keith Zhai / @qizhai : Probably the most positive news on China-US over the past few months: The U.S. and China are nearing a deal to allow American accounting regulators to travel to Hong Kong to inspect the audit records of Chinese companies listed in New York @WSJ https://www.wsj.com/...
Context & Ripple Effects
The delisting clock has been running since the Senate passed legislation in May 2020 that would bar Alibaba and Baidu from US exchanges without foreign-control certification, and the SEC began implementing the audit-compliance version of that law in March 2021 SEC implementation of the delisting law. Even as those threats escalated, more than 20 Chinese companies still went public on Nasdaq or NYSE in 2020, raising $4B per Dealogic data Chinese IPOs continued through the tensions — so both sides had markets to protect.
This report of a near-deal landed days before Washington and Beijing formally announced an agreement to share audits, with US inspectors slated to begin work in Hong Kong by mid-September the announced audit-sharing deal. The stakes are the New York listings of Alibaba, Baidu, and dozens of peers.
First-order effects
- Alibaba, Baidu, and other US-listed Chinese companies get a credible path off the delisting track created by the SEC's audit-compliance law, with American regulators inspecting their Hong Kong-held audit records instead of being locked out.
- The PCAOB-equivalent access reverses the core compliance gap: auditors' working papers for these listings become reviewable on-site rather than shielded by Chinese authorities.
Second-order effects
- A confirmed deal removes the forced-delisting overhang that had been pricing Chinese ADRs down, easing pressure on future US listings from Chinese issuers who kept coming to market even during the standoff.
- Rival listing venues — Hong Kong's secondary-listing pipeline and Shanghai's STAR Market — lose their urgency as a hedge if New York access is secured, shifting where Chinese issuers route new offerings.
Third-order effects
- If inspections proceed and clear roughly the full cohort of US-listed Chinese companies — as later happened when about 200 firms including Alibaba and JD.com were taken off the delisting threat after reviews about 200 companies cleared the delisting threat — cross-border audit access becomes the template for resolving financial-market decoupling disputes between the US and China.
- The episode establishes that market-access leverage can extract regulatory cooperation even amid broader tech and trade restrictions, giving both governments a playbook for sector-by-sector de-escalation.
The trend: US-China financial decoupling is being managed through negotiated inspection regimes rather than outright delisting, with audit access becoming the test case for whether capital markets survive geopolitical rivalry.