China is building a system to screen Chinese companies listed in the United States into groups based on the sensitivity of their data, under a possible concession from Beijing to prevent US regulators from pulling hundreds of groups from the exchange.

The system is designed to provide Chinese companies Under US law that requires public companies to allow regulators to view their audit files, according to four people familiar with the situation.

Two people said that Chinese companies listed in the United States fall into three general categories. The groups will be companies with non-sensitive data, those with sensitive data and others with “confidential” data that should be deleted.

One person said Beijing discussed whether companies in the “sensitive data” category could restructure their operations to achieve compliance, including by outsourcing information to a third party.

The rating system will be the second major concession offered by Beijing to remove obstacles that allow the United States to have full access to audits. In April it Modify the rule ten years ago That limited data sharing practices with outside companies.

The planning, which is under discussion and subject to change, comes after months of stalled negotiations between Beijing and Washington over the US requirement that Chinese companies and their auditors issue detailed audit papers or cancel them in 2024.

Collective debt writedowns could represent an important step toward economic decoupling between the United States and China and jeopardize shareholder value of $1.3 trillion. About 260 of China’s largest companies, including tech group Alibaba, fast food company Yum China and Weibo, could be removed from New York stock exchanges if they fail to meet the requirements.

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The China Securities Regulatory Authority, Beijing’s largest securities regulator, commented after the publication, saying it had “not examined this three-tiered structure” of publicly traded companies.

“Whether a company is listed domestically or internationally, it must comply with the relevant national laws and regulations governing data information management and the regulatory requirements of the place in which it is listed,” the regulator said.

Beijing has traditionally opposed allowing Chinese companies to provide data to foreign regulators on national security grounds.

But as part of a multi-tiered scheme, “low-risk” data companies could share their audit records with the Public Company Accounting and Regulatory Board, the US accounting watchdog, two said. Retailers and restaurant chains are more likely to be included in the lowest risk category.

The head of a large investment company in Hong Kong said, referring to the taxi group that He was fined more than a billion dollars by Beijing this week for cyber security breaches.

US officials are skeptical that Chinese companies will meet all the transparency standards required under the Foreign Corporate Responsibility Act, the 2020 law, which has forced Chinese and Hong Kong companies to open their audit files.

Although there are ongoing and fruitful discussions between the US and Chinese authorities. . . “There are still serious problems and time is quickly running out,” YJ Fischer, director of the International Securities and Exchange Commission, said in a speech in May.

Fischer said agreeing to provide access to control files “would be only the beginning.” PCAOB officials will also have to travel to China and audit any Chinese issuer listed in the United States.

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“I don’t know how we’re going to solve this at all,” said the investment firm’s head. He added that Beijing and Washington were using the dispute over control for “political gain” and that relations were the worst in 40 years.

“As an investor, I hope both sides are practical enough.”

The PCAOB stated in a statement that it “should have full access to the audit working papers of any firm it chooses to audit or audit – no gaps, no exceptions.”