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    Sinopec, PetroChina confirm departure from NYSE


New York delistings are the latest turn in the Sino-US wrangle over auditing protocols.

by: Callum Cyrus

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Natural Gas & LNG News, Asia/Oceania, Corporate, Corporate governance, Share prices, Political, Regulation, News By Country, China

Sinopec, PetroChina confirm departure from NYSE

China's Sinopec and CNPC subsidiary PetroChina both confirmed August 12 they would delist from the New York Stock Exchange (NYSE).

The departures come in response to criticism from the US Securities and Exchange Commission, which argues China's US-listed companies are failing to satisfy national auditing requirements. Sinopec and PetroChina expect to submit their delisting papers August 29.

China Securities Regulatory Commission (CSRC) played down the delistings on August 12, arguing they reflected ordinary business concerns.

The Chinese companies insist US listings represent a small share of their overall trading volume, and PetroChina says its Chinese trading presence will be enough to meet its fundraising requirements. PetroChina has never raised follow-on funding from the US, it added.

Sinopec will also delist its wholly-owned subsidiary, Sinopec Shanghai Petrochemical, from the New York exchange. The three businesses will continue to trade in Shanghai and Hong Kong.

CSRC said: "According to these companies announcements, they have strictly observed relevant US rules and regulations since listed on the US markets, and the delisting decisions are made out of their business considerations.

"These companies are listed on multiple markets, and only a small portion of their securities are traded in US markets. The delisting plan will not jeopardise these companies' fund-raising ability through domestic and overseas capital markets."

The delistings are the latest salvo in a long-running feud between Beijing and Washington over auditing protocols. US congress flexed its muscles over the issue in late-2020, passing a law that requires compliance with US inspection rules within three years to avoid enforced delistings as soon as 2024.

Washington's stance would mean US watchdogs gaining oversight of financial audits which mainly cover Chinese business operations, infringing Beijing's perception of national security.

CSRC updated its rules to allow foreign oversight of Chinese audits in April, according to the South China Morning Post, but the need to comply with Beijing's rigorous state security tests is likely to undermine the new policy. It has also suggested that US and Chinese auditors scrutinise books cooperatively.

US public filing audits are typically supervised by the US Public Company Accounting Oversight Board (PCAOB). Analyst firm Jefferies said in a research note China was likely to list fewer companies in the US, focusing on those that can be subjected to PCAOB-mandated audits without  triggering Chinese security concerns. However Reuters says even delisting "sensitive" Chinese companies will not suffice under US law, as PCAOB must also be able to conduct retrospective inspections, putting non-sensitive companies in the firing line.

The SEC recently ramped up its agenda by finalising rules to bar Chinese companies under existing regulations, Reuters said. The newswire suggests as many as 273 Chinese companies could be affected. In addition to the oil majors, Chinese tech giants Alibaba, Baidu and JD.com all risk losing their dual US- China listings.

Industry observers told Reuters Sinopec and PetroChina had seemingly precipitated US intervention, in a signal that perhaps Beijing's patience over the row is wearing out.

With the SEC and CSRC still scrambling to find an agreeable framework for auditing cooperation, US investors making big bets on Chinese companies stand to lose out. Goldman Sachs estimates $200bn of Chinese equity exposure is held by US institutions in the form of Chinese American Depository Receipts, an instrument that allows US investors to buy Chinese shares.