By Katanga Johnson

WASHINGTON (Reuters) – The U.S. public company accounting regulator said on Thursday that it continued to engage with Chinese regulators about getting access to their auditors’ records, but it remained unclear if the Chinese government would grant the access required by a new U.S. listing law.

The Public Company Accounting Oversight Board (PCAOB) said recent media speculation about an imminent deal that would stop hundreds of Chinese companies from being kicked off American stock exchanges was “premature.”

The regulator added that any agreement would only be a “first step” and that the PCAOB would then investigate to ensure that the deal is being followed.

“If we reach an agreement, then we’ll proceed with inspection and investigation to verify that the agreement works as it is intended.” ()The audit watchdog stated that an agreement not executed successfully will not be in compliance with U.S. Law.”

Chinese regulators have asked some of the country’s U.S.-listed firms, including Alibaba (NYSE:), Baidu(NASDAQ:) and JD (“NASDAQ:”) to be ready for additional audit disclosures, as Beijing intensifies efforts to keep domestic companies listed in New York. Reuters reported Tuesday

The Financial Times and Bloomberg News also reported this month that China’s securities watchdog is weighing a proposal that would allow U.S. regulators to inspect auditors’ working papers for some companies as soon as this year.

China’s regulators also considered allowing U.S. counterparts inspection of audit papers from some Chinese businesses that do not collect sensitive data.

Chinese companies must list on U.S. Stock Exchanges if they own or control a government entity. Also, evidence of the auditing inspections should be provided under SEC regulations last year. These rules could cause more than 200 Chinese companies to be removed from U.S. markets and make Chinese companies less appealing to investors.

U.S. legislators mandated that in December 2020, the watchdog ensures foreign companies in America, particularly Chinese, adhere to U.S. auditing standards. This is after years of China refusing to allow overseas regulators to inspect local accounting firms because of national security concerns.