FirstFT: Alibaba and Yum China first up for US regulators’ audit checks

Good morning.

US regulators will attempt to inspect the Chinese audit files of Alibaba and Yum China next month as part of a landmark deal between Beijing and Washington, according to people familiar with the matter.

The deal, agreed on Friday, allows the US Public Company Accounting Oversight Board, America’s accounting watchdog, to vet the work of audit firms in mainland China and Hong Kong for the first time.

The agreement has laid the foundation to resolve a long simmering dispute between the two superpowers that could result in the US banning the trading on its exchanges of around 200 Chinese companies in 2024, threatening the value of around $1.4tn in the companies’ shares.

Jack Ma’s ecommerce group Alibaba is China’s most valuable overseas-listed company, with a market capitalisation of $249bn on the New York stock exchange. Yum China, which owns the KFC and Pizza Hut brands in China, is worth $21bn on US markets.

Alibaba is audited by PwC in Hong Kong and Yum China is audited by KPMG Huazhen in mainland China. The Big Four accounting firms, which also include Deloitte and EY, have spent three decades building large operations in China. Together, they audit around 130 Chinese companies that are listed in the US, according to the US Securities and Exchange Commission.

Do you think the inspections will go through as planned in order to keep Chinese companies listed on US exchanges? Tell me what you think at firstft@ft.com. Thank you for reading FirstFT Asia — Emily

Five more stories in the news

1. Russia shuts down Nord Stream gas pipeline to Europe Russia has halted the flow of gas through the Nord Stream 1 pipeline to Europe for three days, the latest disruption to an energy link that has been central to Moscow’s efforts to squeeze supplies. The shutdown, which Russia claims is needed for essential maintenance, will add to anxiety in European countries as they seek to secure vital supplies ahead of the winter months.

• Related read: German manufacturers are halting production in response to the surge in energy prices caused by Russia’s squeeze on gas supplies, a trend the government has described as “alarming”.

2. Japan plans big defence spending boost Japan will upgrade its cruise missiles and research hypersonic weapons as it seeks to significantly increase military spending to counter what Tokyo sees as the rising threat from China. The defence ministry today made a record ¥5.6tn ($40bn) budget request for the year to March 2024, compared with ¥5.4tn in planned spending for the current fiscal year.

3. Trump accused of obstructing DoJ probe The US Department of Justice accused Donald Trump’s team of obstructing its investigation into the alleged mishandling of classified documents from his days at the White House, casting doubt on the former president’s claims that he had co-operated with federal investigators.

4. Toyota to invest up to $5.3bn in battery production The world’s largest carmaker will spend up to ¥730bn ($5.3bn) in the US and Japan to accelerate its production of batteries, the latest in a series of investments by Asian carmakers in electric vehicles. The announcement came just two days after rival Honda and South Korean battery maker LG Energy Solution said they would spend $4.4bn to build a battery plant in the US.

5. EU rips up Russia visa deal The EU has agreed to suspend a visa deal with Moscow and backed demands by eastern member states to curb the number of Russians crossing into their countries, as it bows to pressure to punish travellers over Vladimir Putin’s invasion of Ukraine.

The day ahead

Shanghai schools reopen Students will return to classrooms after months of Covid-19 closures. (Al Jazeera)

The European Medicines Agency meeting The agency is set to review new vaccine boosters by Moderna and BioNTech/Pfizer, which have been adapted to target the Omicron variant. The US approved Omicron-specific vaccines yesterday.

European Premiere League transfer window closes Chelsea has a net spend of more than £200mn on six confirmed signings, even before the transfer window officially closed today. Premium subscribers can click here to sign up for our Scoreboard newsletter on the business of sport.

What else we’re reading

Singapore becomes a haven for Chinese elite In the Hollywood production Crazy Rich Asians, Singapore was portrayed as a cocktail party that never ended, and where luxury was always within reach. Now this already crazily rich city is receiving a big new dose of money — thanks to a fresh influx of tycoons from across the South China Sea.

Self-driving cars have nothing on Japan’s self-captaining ships Worldwide, the race to perfect fully autonomous operations for large commercial vessels is intense, and arguably of far greater practical importance, than that for self-driving cars, writes the FT’s Leo Lewis.

China drought highlights economic pain from global warming The heatwave in south-west China, which caused temperatures in Chongqing to rise 7C higher than the average level over the past decade, has been severe. Widespread power shortages in the south-west paralysed industry in a crisis that scientists said was probably caused by climate change.

Rishi Sunak warns of risk that markets lose faith in UK economy Conservative party leadership contender Rishi Sunak warned that it would be “complacent and irresponsible” to ignore the risk of markets losing confidence in the British economy, in a Financial Times interview. The former chancellor said he “struggled to see” how the promises of his opponent Liz Truss “add up”.

Don’t ban private jets — make them a green testing ground Public anger is growing against the carbon-belching elite, with rising calls to ban private jets. Should regulators instead turn such wasteful means of getting from A to B into a testing ground for new technologies and fuels, asks Pilita Clark.

Thank you to readers who took our poll yesterday. Of those who responded, 23 per cent said they have suffered from new, long-term health issues since contracting Covid-19.

Obituary

World leaders paid tribute to Mikhail Gorbachev after the former Soviet leader died at the age of 91. But reaction in Russia was more muted. Although he ruled in Moscow for less than seven years, the consequences of Gorbachev’s tenure rewrote the global order at the end of the 20th century.