UK considers accounting changes to attract Chinese listings
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The UK accounting regulator is considering changes to strict auditing rules to encourage more Chinese companies to list in London after the government pushed it to address the issue.
The Financial Reporting Council will consult on temporarily amending its “third country auditor” policy, it said on Monday. The change would permit Chinese-registered entities that wish to list global depositary receipts in London to use Chinese auditing standards.
GDRs are issued by banks to represent shares in overseas companies, while the issuer holds the underlying shares in a company’s home market. Currently, if a Chinese company wants to raise money by listing GDRs in London, it has to follow UK-approved auditing standards.
The move comes amid growing anxiety about the waning attractiveness of the UK’s equity markets for companies and investors in comparison to Wall Street. Fundraising from initial public offerings in London last year tumbled to its lowest level in at least 30 years.
Hopes that online fast-fashion retailer Shein would list in London were dashed last year. The Chinese-founded company filed for an initial public offering in Hong Kong after UK and Chinese regulators failed to agree on appropriate language to be used in the risk disclosure section of its prospectus.
The FRC said that its consultation came at the request of the UK government, which is “seeking to address a perceived barrier discouraging some Chinese-registered issuers from choosing the UK as a listing venue”.
Allowing Chinese auditing standards to be used temporarily would “encourage eligible Chinese registered entities to list on the London Stock Exchange”, the FRC said.
The proposed amendment would align with the government’s push to boost UK economic growth and strengthen the London market’s competitiveness, the regulator said, adding it was seeking views on whether it appropriately balances audit quality with economic growth.
