China’s Alibaba is getting closer to being removed from American stock exchanges in response to Beijing’s refusal to let U.S. inspectors examine the company’s audits.
As Bloomberg reported Friday (July 29), the Securities and Exchange Commission (SEC) has added the tech giant — the largest Chinese operation listed on American markets — to a growing list of companies facing removal over the audit situation.
Bloomberg said that the publication of a business’ name begins a three-year countdown to final delisting. While many countries allow U.S. audit inspections, China and Hong Kong have declined, arguing there are confidentiality and national security concerns.
As PYMNTS has noted, the dispute comes down to this: Regulators in the U.S. require that certain companies provide auditing work papers before listing on U.S. exchanges. Chinese regulators say that certain companies block representatives of foreign entities from seeing certain information that have been deemed sensitive.
Read more: Didi Moves Closer to NYSE Delisting
The report said that a number of Chinese companies — including Alibaba — have begun to look to Hong Kong for their primary listings. That move could help these companies attract more business from China, while also offering a roadmap for other companies listed in the U.S. if the audit dispute is not resolved.
This news comes two months after shareholders in Chinese ride-hailing app Didi Global voted to delist the company from the New York Stock Exchange (NYSE).
The vote was inspired at least in part by a Chinese government review of certain data-handling procedures. A separate announcement said that the delisting will help the company “better cooperate with the cybersecurity review and rectification measures” and “the company’s shares will not be listed on any other stock exchange before the delisting is completed.”
See also: Chinese Regulators Hit Didi’s Payments Arm with Major Fine
But Didi had previously announced delisting was likely after it was caught in the auditing standards battle between China and the U.S. following its initial public offering in 2021.
Earlier this month, Didi’s payments division was fined 4.27 million yuan ($632,170) by the People’s Bank of China.
The fines were connected to violations involving traceability and authenticity requirements for transactions, opening accounts for financial firms, and neglecting to promptly communicate important risk events. Didi was reportedly working with regulators to resolve the issue.
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