China and the U.S. are "moving toward each other" in audit regulatory cooperation, the China Securities Journal (CSJ) reported Sunday citing an insider close to the regulatory department.

The regulators of the two sides are "fully aware of each other's concerns" and are trying to find solutions to the auditing dispute, said the source, adding the move is in the "best interests" of the two countries' capital markets and global investors.

Earlier this month, the U.S. authorities identified five New York-listed Chinese firms, including Yum China, that have failed to provide access to audit documents and warned they may be removed from the exchange.

The Chinese securities regulator later said it respected the U.S. Securities Exchange Commission (SEC)'s efforts to strengthen supervision of relevant accounting firms, calling the announcement a "normal procedure."

However, the China Securities Regulatory Commission (CSRC) also noted that it "firmly opposes the wrong practice of some forces politicizing securities regulation."

"We always commit to the spirit of openness and cooperation," said the CSRC in a statement, adding they "are willing to resolve the issues ... through regulatory cooperation."

The five Chinese firms are the first U.S.-listed Chinese stocks to be identified as having failed to adhere to the Holding Foreign Companies Accountable Act (HFCAA), after they recently filed their annual reports for 2021 with the SEC. They can submit evidence disputing identification by March 29.

Passed in December 2020 amid China-U.S. disputes, the HFCAA permits the SEC to remove companies that do not allow U.S. regulators to review their audits for three consecutive years, but Chinese law prohibits company auditors from providing the same information to U.S. regulators over data security concerns.

The CSRC said on March 11 that together with the country's finance ministry, they had been in contact with the U.S. Public Company Accounting Oversight Board.

Despite not disclosing details of the negotiations, the CSRC said both sides showed "a positive willingness and a pragmatic attitude to solve the problem," according to the source cited by CSJ.

The source mentioned that some overseas-listed Chinese enterprises and investment companies have taken part in a meeting held by the CSRC on Sunday to learn the market's opinions on the current situation of Chinese concept stocks.

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