Even so, all companies operating in China must comply with Chinese laws, Ling noted. That includes auditors from foreign-owned firms that oversee accounting statements issued by Chinese companies.

And Chinese law prohibits audit papers from being removed offshore, and foreign regulators from having jurisdiction inside the country's borders.

The Law on Guarding State Secrets, meanwhile, seeks to protect national security by prohibiting companies in certain industries, such as military and defense, from revealing certain financial data, he said.

The two countries are on a course to resolving the dispute by trying to clinch an agreement allowing cross-border access to financial records. But no progress toward that end has been made so far.

A failure to reach a deal may prompt US regulators to try to de-register the firms, Bloomberg quoted Paul Gillis, professor at Peking University's Guanghua School of Management, as saying.

As a result, "all the Chinese companies listed in the US will be without auditors and that will lead to their delisting from US stock exchanges", he said.

But the ultimate intent is not the wholesale delisting of Chinese companies, according to John Jullens, a Shanghai-based director at consultancy Booz & Co.

"I think the SEC is very concerned about the integrity of the companies that are listed," he said. "And, on occasion, they make these inquiries irrespective of where these companies are coming from. There's no specific intent on a specific company."

Jullens said there's no reason why Chinese companies cannot be listed in the US. So long as a company's fundamentals are solid and it has good prospects for expansion, it shouldn't be worried about short selling, which is a widely used investment strategy.

Sun Lijian, deputy chief of the school at economics at Fudan University in Shanghai, said such investigations do nothing to provide a level playing field.

Besides, foreign auditors are much more familiar with the other countries' legal boundaries than are Chinese companies, he said. So if they begin to use legal concerns as an excuse to shrug off their responsibilities, Chinese companies will find themselves at a disadvantage, Sun said.

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