Exclusive: US regulators to vet Alibaba, other Chinese firms audit sources

HONG KONG, Aug 31 (Reuters) – U.S. regulators have singled out e-commerce giant Alibaba Group Holding Ltd ( 9988.HK ) and other U.S.-listed Chinese companies for audit inspections starting next month, three sources familiar with the matter said.

The move follows Friday’s landmark audit agreement between Beijing and Washington, which allows US regulators to vet accounting firms in mainland China and Hong Kong, potentially ending a long-running dispute that threatened to delist more than 200 Chinese companies from US exchanges. read more

Alibaba has been notified that it is among the first batch of Chinese companies whose audits will be inspected by the US audit watchdog – the Public Company Accounting Oversight Board (PCAOB) – in Hong Kong, the sources told Reuters.

PwC, the accounting firm of China’s largest e-commerce company, has also been informed of the audit work inspection, the sources said, declining to be identified due to confidentiality restrictions.

Alibaba did not respond to a request for comment while a PwC spokesperson said it was company policy not to comment on any client matters.

A spokesperson for the PCAOB said the board does not comment on inspections. The China Securities Regulatory Commission (CSRC) did not immediately respond to a request for comment.

Alibaba’s U.S.-listed shares closed down nearly 3% on Tuesday after the Reuters report, after being up about 1% in premarket trading. Hong Kong shares fell more than 3% in Wednesday morning trading, while tech giants listed in the city ( .HSTECH ) fell nearly 2%.

US regulators have for more than a decade demanded access to audit documents from US-listed Chinese companies, but Beijing has been reluctant to let US regulators inspect its accounting firms, citing national security concerns.

Alibaba, which went public in New York in 2014 in what was at the time the largest IPO in history, is the most valuable Chinese firm listed in the United States with a market value of $248 billion as of Tuesday.

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The PCAOB said on Friday that the watchdog had notified the selected companies, without naming them, and its officials are expected to land in Hong Kong, where the inspections will take place, by mid-September.

The regulator, which oversees audits of US publicly traded companies, would select companies based on risk factors, such as size and sector, and that no company could expect special treatment, according to the PCAOB. read more

Reuters could not immediately determine how many and which other Chinese companies were in the first group of US inspections.

Founded in 1999, Alibaba counts e-commerce as its core business and has expanded into fast-growing sectors such as cloud services and the Internet of Things in recent years. It also owns AutoNavi Holdings Ltd, a major Chinese digital mapping and navigation company.

In July, it was added to the US Securities and Exchange Commission’s (SEC) list of Chinese companies that may be delisted for failing to comply with audit requirements. read more

The list now has more than 160 Chinese companies, including fellow e-commerce group JD.com Inc ( 9618.HK ) and electric car maker Nio Inc.

Current US rules stipulate that Chinese companies that do not comply with requests for audit working papers will be suspended from trading in the US in early 2024.

Days before being added to the SEC’s delisting watch list, Alibaba said it planned to add a primary listing in Hong Kong to its New York presence, targeting investors in mainland China. read more

Already present on the Hong Kong stock exchange with a secondary listing since 2019, the tech giant said it expects the primary listing to be completed by the end of 2022.

Reporting by Julie Zhu in Hong Kong; Additional reporting by Katanga Johnson in Washington; Editing by Sumeet Chatterjee and Christopher Cushing

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