Chinese super regulator calls for crackdown on ‘cancer’ of fraud in capital markets
- Financial Stability and Development Committee sets out seven measures to eliminate fraudulent activity
- Committee acknowledges ‘shortcomings in China’s financial system design and the subsequent low cost of committing a crime’
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 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”.
“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.
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