(Yicai Global) April 22 -- China’s securities watchdog expects to reach a deal soon with US regulators on cross-border auditing rules, an issue that has raised the prospect of Chinese firms being kicked from US stock markets, according to its vice chairman.

“I’m very confident that we’ll reach a cooperation agreement in the near future,” Fang Xinghai said yesterday at the annual Boao Forum for Asia gathering. The China Securities Regulatory Commission’s regular talks with US counterparts are proceeding well, he said, adding that the parties are negotiating via video link once a week to finalize details.

China and the United States have been negotiating on audit rules since the US Congress passed the Holding Foreign Companies Accountable Act in 2020, which tightened up the regulation of US-listed foreign companies.

The act bans overseas issuers that fail to meet the US Public Company Accounting Oversight Board’s inspection requirements for three consecutive years from trading in the country. A deal between the two sides would remove the uncertainty surrounding the future of Chinese stocks on US bourses.

Fang said an agreement would mean that the “PCAOB could conduct checks on Chinese accounting firms in China in a reasonable manner.”

He also said that the CSRC supports Chinese businesses that seek to list offshore. Because China’s capital market is not fully developed, the country will continue to promote both domestic and overseas listings, he said.

Regarding the recent crackdown on initial public offerings, Fang said that the problem is not that there are too many companies seeking to go public, but that the IPO pricing needs to be improved.

The ability of the Chinese market to serve different types of investors and deal with different challenges can be further developed. For example, in terms of IPO pricing, more experienced foreign instructional investors can be brought in to improve the quality of the IPO market, according to Fang.

China has made great progress in attracting foreign funds, he said, with CNY887.4 billion (USD137.2 billion) going into Chinese stock market from 2019 to 2021, accounting for about 4.5 percent of the mainland’s market value, which is still a relatively small percentage compared with South Korea and Japan, where the figure is 20 percent and 30 percent, respectively.

There is still room for more. Fang expects the net inflow of foreign capital this year to be substantial.

Editor: Futura Costaglione