The news that Hong Kong’s stock exchange will start allowing locally listed Chinese companies to start using Chinese accounting standards and mainland auditors might raise a few eyebrows.

Those not in favor of the decision cited concerns that bringing mainland audit firms to Hong Kong could
erode investors’ confidence in the quality of Hong Kong’s capital markets and that the new regime will reduce the regulatory power of Hong Kong watchdogs.

But the exchange and some industry participants are defending the move. They say that China’s accounting and auditing standards have improved dramatically recently, and are on the road to convergence with International Financial Reporting Standards, also used in Hong Kong.