A super regulator that oversees China’s banking, securities and insurance watchdogs has called for zero tolerance and a stronger crackdown on fraud, to ward off an impending US legislation that will target Chinese companies for failure to submit an audit to an American oversight board and drive them off Wall Street. The Financial Stability and Development Committee (FSDC) , which is headed by Vice-Premier Liu He, sets out seven measures to eliminate fraudulent activity in mainland capital markets, in a meeting held over the weekend, according to a statement issued on Sunday. The committee acknowledged that serious accounting fraud had taken place in several instances recently due to “shortcomings in China’s financial system design and the subsequent low cost of committing a crime”. Why China’s retail stock investors might have a better chance of recouping losses from fraud “Fraudulent issuance, financial fraud and other criminal acts are the cancer of the capital market,” it said in the statement. “They must be resolutely, decisively and promptly corrected.” The statement comes amid unprecedented tension between Beijing and Washington over the regulation and oversight of Chinese companies listed in the United States. The US Senate in May passed a bill that could lead to Chinese companies delisting from American exchanges, unless they submit an audit to be reviewed by the US Public Company Accounting Oversight Board (PCAOB). The legislation needs to be approved by the House of Representatives before it can become a law. The China Securities Regulatory Commission (CSRC) has stressed its willingness to cooperate with its US counterpart on this matter. But the PCAOB remains unsatisfied, saying that obstacles to inspecting audits of more than 200 listed Chinese companies persist, because Chinese authorities refuse to abide by fundamental US principles. The accounting scandal involving coffee chain start-up Luckin Coffee in April, which led to US$11 billion in market value being wiped out for investors, has increased tensions between the US and China. Its Nasdaq-listed shares were suspended from trading this month, after plunging by more than 95 per cent, and the company will be delisted. The measures set out by the FSDC include speeding up of investigations into major crimes and stepped up punishment; the timely launch of class-action lawsuits in major cases with significant negative influence on society; and the improvement of the delisting system to allow unfit companies to exit the market. US says oversight of Chinese companies futile, as authorities refuse American principles The Chinese markets have also been hit by a slew of high-profile scandals at listed companies over the past year, including the 30 billion yuan (US$4.3 billion) fraud by Kangmei Pharmaceutical and the 12 billion yuan fraud at Kangde Xin Composite Material Group. The committee called for improvements in the legal system and law enforcement to deter criminal activity. It also ordered the CSRC to coordinate with other regulators and set up a working team to crack down on illegal acts in the market and promote its law enforcement activity.