SHANGHAI (Reuters) - Chinese firms listed in the United States would be welcomed home, a senior Shanghai Stock Exchange official said, chiding the main U.S. auditor watchdog and other American institutions for having politicized company accounting issues.
Zhou Qinye, the exchange’s vice general manager, said while only a few firms have real accounting issues, many overseas investors are short-selling Chinese companies for profit.
“The current situation is the result of some institutions seeking to politicize the matter, and it’s difficult to predict where things are heading,” Zhou told a conference, referring to a spat between U.S. and Chinese regulators over cross-border inspection of audit firms.
Shares in many overseas-listed Chinese firms have slumped this year after accounting scandals swirled around several China-focused companies.
Last week, U.S. securities regulators charged Chinese software company Longtop Financial Technologies Ltd with failing to file current and accurate financial reports.
Toronto-listed Sino-Forest Corp, which triggered a wave of selling in China-listed firms in June after it was accused of fraudulently exaggerating its assets, said on Tuesday that an independent committee found no evidence of such wrongdoing at the company.
Still, Zhou said Chinese firms listed abroad needed to improve investor relations management and learn more about the market environment and regulations.
But they are welcome to come home, he said.
“One way is for overseas-listed companies to delist there and come back home, including Chinese and Hong Kong stock exchanges,” Zhou said.
“For the Shanghai and Shenzhen exchanges, this could be an opportunity as we know that many overseas-listed Chinese companies are not bad. So we welcome those China stocks to return home.”
Some private equity firms have already started looking at the business opportunities related to bringing home Chinese companies which have suffered from the heavy selling.
Chinese firms seeking to list on mainland exchanges have various regulatory hurdles to clear, such as posting consecutive years of profit, but Zhou said the securities regulator was considering relaxing some of those rules.
James Doty, the chairman of U.S. Public Company Accounting Oversight Board (PCAOB), an auditor watchdog, repeated last week concerns about auditors’ inspections in China. He said the watchdog needs to gain entrance soon to China to inspect firms that audit U.S.-listed companies.
But the Chinese government has its own set of accounting rules and examination systems and cannot accept such a request, Zhou said, repeating Beijing’s stance on the issue.
Marisa Lago, Assistant Secretary for International Markets and Development at the U.S. Department of the Treasury, declined to comment to reporters in Beijing about any progress with the Chinese over the audit issue.
The U.S. has been heating up pressure for an early resolution, but some experts say such attempts will only backfire.
“They (the U.S. side) have politicized it. They’ve made it more difficult to seek a compromise,” said Paul Gillis, visiting professor of accounting at Peking University.
“The solution has to come from China. There’s not much the U.S. can do, and the more the U.S. does, the worse it gets.”
Additional reporting by Lucy Hornby in BEIJING; Editing by Neil Fullick and Ian Geoghegan