That the Chinese and United States regulatory authorities finally reached an agreement that allows US regulators to inspect US-listed Chinese company audits is indeed an all-win outcome that illustrates both the need for and possibility of reciprocity-based collaboration even in the current severe climate of bilateral ties.
When news came that the US Public Company Accounting Oversight Board and the China Securities Regulatory Commission had finally broken their years-long deadlock on Friday, sighs of relief were heard from all stakeholding parties.
While easing the delisting pressure on the hundreds of Chinese companies listed on US exchanges, it also mitigates fears that Chinese companies may permanently lose access to the world's deepest capital markets and that the two countries are headed toward de facto financial decoupling.
The CSRC hailed the agreement as an important step that would benefit investors, companies and both countries. Lynn Martin, president of the New York Stock Exchange, called it "an important development for the global economy and our US capital markets".
Yet, just as many have observed, this is only the first step toward truly breaking the longstanding regulatory deadlock, which has been unduly politicized, even stretched into a national security subject. Whether the pact reached on Friday, the details of which have not been published, will work as anticipated rests not only on how well the US regulators' first inspections in Hong Kong proceed, but also on whether constructive engagement can continue over time.
PCAOB inspectors are expected to travel to Hong Kong in mid-September to conduct initial inspections, after which the US regulatory authority will determine whether its inspectors have been granted the "full access" promised and make their judgment on Chinese compliance. The Friday deal is being viewed as partial because plenty of technical details may get in the way of the implementation.
How the inspections proceed will to a great extent determine the fate of more than 200 Chinese companies listed in US capital markets, some of which are key industry leaders in China whose financial health has significant impacts on the national economy.
Since the two countries' regulators were able to navigate the complexities of the political situation to arrive at the agreement, there is every reason to hope that they will be able to arrive at a truly win-win scenario. And that would be good news indeed.
After all, it would prove it is possible to find a balance between the two countries' respective national security concerns.