PCAOB has been pressing China to let it inspect auditors that audit US-listed Chinese companies since last summer.It is a reasonable request.  Nothing wrong with it, at all.  However, PCAOB's effort is heading to the wall. Why? Because it makes the most common mistake some American governmental entities and corporations tend to make when going to China - making criticism to begin with and enforcing American standards on Chinese without any compromise.

(Reuters) - Chinese firms listed in the United States would be welcomed home, a senior Shanghai Stock Exchange official said, chiding the main U.S. auditor watchdog and other American institutions for having politicized company accounting issues. Click here for the full article.

I agree with Paul Gillis, the visiting scholar of accounting at Peking University: "They (the U.S. side) have politicized it. They've made it more difficult to seek a compromise," said Paul Gillis, visiting professor of accounting at Peking University.

PCAOB, as well as other organizations that want to accomplish anything in China, has to keep in mind that "saving face" (not embarrassing or criticizing someone in public) is Doing Business in China 101 Rule #1. Heating up pressure and blaming Chinese regulators in public will only backfire. The Chinese regulator will never say in public, "dear PCAOB, sorry, we messed up, give us some time to fix the problem."  Never, ever. They definitely know there ARE problems. To get them coordinate with you, PCAOB could instead reach out to the Chinese for their "help and advice".  Out of generosity, the Chinese may be more willing to extend their hand to help PCAOB sort things out. Remember, you are not solving the problems of Chinese; instead, Chinese are helping solve your problems.  Whenever there is disagreement, take the Chinese to a bankquet or Karaoke.  If you really feel to yell, take the Chinese to a resort and close the door before you yell. Do not forget to keep media out. 

Doing Business in China 101 Rule #2 Patience is the virtue. Do not expect to accomplish everything on the agenda. Feel lucky if one item gets done this time.  Please come back next time.

I wish PCAOB good luck.