There was an interesting article by Yi Peng in the Chinese edition of the 21st Century Business Herald. It does not appear on the English website. The article reports on the ongoing standoff between U.S. and Chinese regulators on U.S. listed Chinese stocks. There is some information in this article that I have not seen in any Western reports.
The article suggests that the Chinese side of the dialogue between the U.S. and China is mostly playing out in carefully worded press releases, with some public comments at the U.S. China Strategic Dialogue. I suppose the 21st Century article may be part of that process.
The sense I get from the article is that China wants to provide specific information to the PCAOB based on document requests that it can vet for state secrecy issues, while the PCAOB wants to come and do joint inspections. The Chinese approach is unworkable. It is not practical to do an inspection of an audit without access to the full audit working papers. The deficiencies in a audit will be discovered more because of what is not in the working papers, rather than through an examination of what is there. That is, deficiencies in audit quality often relate to the failure to do the steps necessary to verify a particular balance, not from doing the steps incorrectly.
It was reported in October that Chinese regulators called the Big Four in and asked them to do a self assessment of how much information had been shared with their overseas offices and overseas regulators. The article seems to indicate that the State Council put that investigation on hold. That probably signals that the State Council did not wish to further escalate the situation until a way forward could be agreed.
The article sounds a more optimistic note on judicial cooperation with respect to lawsuits against U.S. listed Chinese companies. The framework for legal cooperation is better developed, but the article indicates it has generally involved Chinese authorities collecting evidence against smugglers for use in U.S. Courts. The article points out those cases are different - they involve crimes that took place outside of China. In the stock fraud cases, the crimes were usually committed inside of China. China appears to be concerned about allowing foreign regulators to punish crimes that take place in China. That concern probably extends to PCAOB inspections as well. My suggestion that the PCOAB be in a supporting role to Chinese regulators who retain all disciplinary powers (other than deregistration) might meet Chinese concerns.
The article indicates there is some cooperation taking place on civil actions. It references a delisted company that recently went through discovery in Shenzhen. The article indicates that coordination between local and central regulators on cross border issues has not been well established.
I don't know if this article speaks for the official position. It indicates to me that China is working to find a solution, but has found it to be a difficult problem to get their arms around. Dealing with both the auditors and Chinese frauds spans across several bureaucracies and geographies within China. The PCAOB and SEC might be wise to be a little patient while they sort this out.