At first glance, the news of Chinese insurance broker Fanhua Inc. withdrawing their proposal to privatize follows a familiar pattern. Over the past two years, it has become common for U.S.-listed China stocks to have these kinds of on-off announcements due to the pressure applied by both the governments of China and the United States.

Generally, how it goes is a company's stock value would reach a new low, prompting plans, usually led by the firm's executives, to privatize while the stock is at a fraction of its worth. Unfortunately, the stock prices would usually keep dropping as the U.S. and China added to worries about the futures of these companies.

Consequently, the management buyout teams would withdraw their bids or let them expire. Occasionally, they would put in fresh buyout bids at a more affordable price to take into account the drop in stock prices. Yet, those were relatively uncommon since prices generally kept falling.

The news stating "Fanhua Announces Withdrawal of Non-binding Going Private Proposal," released on Friday after the markets closed, was likely overlooked by most investors rushing to start their Christmas holiday. Nevertheless, upon a closer inspection of the announcement, it became evident that the content included something that had not been seen before.

Hu Yinan, the founder of Fanhua, revealed that his first proposal for privatization happened a year before in response to the conditions then, noting that the intent was to achieve an "inner strategic transformation of the company."

The situation has altered considerably since Hu Yinan made that proposal. Most significantly, in August, the United States and China agreed to a historic accord allowing the U.S. to inspect China-based financial documents of Chinese companies listed on U.S. exchanges - something previously prohibited by the Chinese government and considered "classified information."

Had an agreement not been reached, more than 200 Chinese stocks traded in the United States, such as the multi-billion-dollar Alibaba, would have been delisted.

After the agreement was signed, a group of examiners from the U.S. Public Company Accounting Oversight Board, the American securities regulator's accounting branch, traveled to Hong Kong in September to undertake test audits. That group gave an emphatic approval of the agreement at the beginning of this month, communicating that it had acquired "total access" to the data it sought.

Hu pointed to that advancement as a justification for his latest decision to revoke his proposition.

Taking into account the current statement from the Public Company Accounting Oversight Board that drastically reduces the chance of China-based U.S.-listed companies being delisted, as well as the promising results of the company's strategic shift, staying listed in the U.S. should be better for the company in the long run.

Hu's analysis is one of the most concrete signs that the possibility of delisting Chinese businesses is waning. Other signs of improving trust from other companies will undoubtedly surface in the next few months. Moreover, the other main concern for Chinese companies, the threat from a number of regulatory measures taken by Beijing, also looks to be diminishing as China shifts its attention from Covid-19 control to reviving its struggling economy.

On Tuesday, Fanhua's stocks saw a 3.3% boost on the New York Stock Exchange, the day after the announcement. Since its last quarterly results, announced in late November, the stock has surged 69%. This trend has also been repeated across many other Chinese stocks in recent weeks, and if the shares can sustain these gains, Fanhua may be able to finish the year with positive growth, something few American stocks can boast of. Thus far, in 2022, Fanhua's stock has increased by 8%.

The company's stocks are traded at an elevated trailing P/E ratio of 72. This is, however, expected to drop drastically to 20 as China ends its "zero Covid" policy, leading to recovering economic activity. Nevertheless, the forward ratio is still considerably higher than most of its competitors, such as ZhongAn, with a P/E of 9.1, and Ping An, 6.6.

Fanhua's high premium is likely, to some extent, due to its position as an insurance broker, which carries lower risk than companies that take on the function of underwriters like ZhongAn and Ping An. Additionally, Fanhua has been turning a profit in recent years, unlike many of its smaller private counterparts.

The most recent report from Fanhua revealed a shaky performance, which is something that many Chinese companies have experienced this year due to the significant disruptions caused by regular Covid-19 restrictions, culminating in massive lockdowns in multiple large cities over the second and third quarters. Fortunately, the nation decided to end that strategy at the beginning of this month, and it looks like conditions will gradually become more ordinary as we approach 2023.

During the third quarter of the year, Fanhua saw its revenue drop 8.7% compared to the same period of the last year, settling at 624.9 million yuan ($91 million). In contrast, its net income slightly improved by 3.4%, reaching 35.5 million yuan. This divergence is in line with a pattern seen among Chinese businesses today, as they strive to reduce expenses and enhance efficiency. Fanhua cut its total operating costs and expenses by 9.7%, thus increasing its operating margin to 5.2% - up from 4.2% in the same period the previous year.

Ultimately, this type of cost-reduction appears to be a positive measure, requiring firms to eliminate the extra expenses they have built up during more affluent times in China. This will likely make the larger group of companies slenderer and more efficient, enabling them to flourish once more when the circumstances improve.