FirstFT: US regulators gain access to audits of Chinese companies

US regulators said they had been allowed to inspect the work of auditors in China for the first time, easing the threat that about 200 Chinese companies could be thrown off the US stock market.

The announcement represents a significant breakthrough after a more than decade-long stand-off between Beijing and Washington, which has argued shoddy audit work contributed to a series of accounting frauds at US-listed Chinese companies.

Companies such as Alibaba, JD.com and Baidu were on course to be delisted starting in 2024 under US legislation that bans trading in stocks whose auditors cannot be inspected by the Public Company Accounting Oversight Board.

China agreed in August to let the PCAOB examine work papers from Chinese auditors, including the local affiliates of the Big Four global accounting firms, but the agency had signalled that it was sceptical it would receive unfettered access.

The PCAOB was set up to inspect all the accounting firms that audit US-listed companies, regardless of where they are based. “The proof was indeed in the pudding, at least in 2022,” said Gary Gensler, chair of the US Securities and Exchange Commission, which oversees the PCAOB.

• Read more: In more downbeat news for US-China relations, the US has placed three dozen Chinese companies on a trade blacklist, in another escalation of its effort to slow China’s development of advanced chips and technologies for military uses such as hypersonic weapons.

Five more stories in the news

1. Global stocks tumble as international outlook sours Investors took fright at a wave of interest rate rises from central banks, which threatened more to come in the fight to tame inflation. The benchmark S&P 500 was down 2.2 per cent on Thursday afternoon and the tech-heavy Nasdaq Composite shed 2.9 per cent. In Europe the Stoxx 600 fell 2.8 per cent following hawkish warnings on interest rates. Hong Kong’s Hang Seng index was down 1.6 per cent yesterday, while Japan’s Topix lost 0.2 per cent and China’s CSI 300 traded flat.

2. Beijing urged to roll out Covid boosters to avoid 1mn deaths Beijing must rapidly roll out booster shots and antiviral drugs as well as enforce social controls if China is to avoid a Covid-19 death toll of close to 1mn people, according to a new report part-funded by the Chinese Centers for Disease Control and Prevention.

3. New Zealand economy expands at twice expected pace New Zealand’s economy grew by a “whopping” 2 per cent in the three months to September, double economists’ expectations and reinforcing the central bank’s ultra-hawkish stance to tackle inflation. The quarterly rise in gross domestic product was driven by a rebound in construction, services and tourism after the South Pacific country reopened its borders earlier this year.

4. Bahamian authorities tipped off by Bankman-Fried associate Ryan Salame, co-chief executive of FTX’s Bahamas operating entity, told regulators on the island in the days before FTX collapsed that the now-disgraced founder had likely funnelled customer money to cover losses at his hedge fund Alameda Research, a move that helped accelerate the 30-year-old’s downfall.

5. SEC sets out sweeping overhaul of US stock market The main US markets watchdog has proposed the most sweeping overhaul of stock trading in almost two decades in an effort to improve prices and transparency for small investors. But the plans led to resistance from market making firms.

The days ahead

Quadruple Witching Day In the final hour of stock market trading stock index futures, stock index options, stock options and single-stock futures will all expire on Friday.

World Cup final Lionel Messi’s Argentina and Antoine Griezmann’s France will battle it out in the finals on Sunday.

What else we’re reading and listening to

Crypto hangover hits Hong Kong For Hong Kong, the timing of the FTX collapse could hardly have been worse. Just weeks ago, the city underlined its ambitions to be Asia’s premier crypto hub, but now many retail customers in Hong Kong burnt by the fallout wish it hadn’t been so easy to get their hands on virtual assets, writes Primrose Riordan.

Who is going to pay for Japan’s military build-up? Japan has embarked on a historic military build-up in its boldest departure from the pacifist stance adopted at the end of the second world war. But one crucial question remains unresolved: who will be asked to shoulder the greater burden, households or companies?

• Related read: The UK and Italy’s groundbreaking partnership with Japan to build a new combat jet could open up export markets in Asia that have historically proved difficult to penetrate, according to the chief executives of two of the industrial groups involved.

Fall of the house of Sergei Leontiev He said he was a refugee from Vladimir Putin’s autocracy. But why did financial entrepreneur Sergei Leontiev really leave Russia for exile in the US? Accounts from former colleagues, foreign shareholders and experts in Russian finance paint a different picture.

‘I feel for the regulators. You’re damned if you do and you’re damned if you don’t’ Sheila Bair helped lead the response to the 2008 financial crisis as head of the US Federal Deposit Insurance Corporation. In an interview with the Financial Times, she warns that regulators have never really got to grips with private equity, hedge funds and private lenders, collectively dubbed “shadow banks”.

Inside China’s intelligence operation Much has been written in recent years about China’s espionage, writes Demetri Sevastopulo, but Alex Joske’s Spies and Lies goes inside China’s intelligence operation to distil huge amounts of open-source information on Beijing’s Ministry of State Security. Read Demetri’s full review of the book here.

Property

Check out these five homes for sale that offer December sun, from a Thai villa with three infinity pools to a house in Zanzibar with a private beach on the Indian Ocean.