Companies with data on over 1 million users must now apply for cybersecurity approval when searching for listings in other countries due to the risk that this personal data and information could be ‘affected, controlled and exploited maliciously by foreign governments, ”the Cyberspace Administration of China said in a statement Saturday. The cybersecurity review will also examine the potential national security risks of overseas IPOs, he said.
The move announced on Saturday, which confirms a previous Bloomberg report, is one of the most concrete steps taken to date to restrict the ability of tech companies to raise capital in the United States through a variable interest entity model. like Alibaba. Group Holding Ltd. to Baidu Inc. and Didi Global Inc. adopted. Regulators are also considering requiring VIEs like Alibaba, which have already gone public, to seek approval for additional share offerings in the offshore market, people with knowledge of the matter said.
The regulator is seeking comments on the proposed rules, which apply specifically to listings in foreign countries, before they are implemented. So far this year, 37 Chinese companies have listed in the United States, surpassing last year’s tally, and have raised a total of $ 12.9 billion, according to data compiled by Bloomberg.
“These rules will push more Chinese Internet companies to register in Hong Kong rather than in another country, to bypass such a test,” said Feng Chucheng, partner of research firm Plenum in Beijing. “The threshold of one million users is very low and would apply essentially to all Internet companies aspiring to an IPO. “
Authorities stepped up the crackdown on overseas listings after Didi announced his debut in June, despite being asked to delay plans three months ago. The State Council said on Tuesday that the rules for overseas listings will be revised while listed companies will be held accountable for the security of their data.
Even before the rules were announced, some companies that had planned to register in New York City withdrew their IPOS. Beijing-based LinkDoc Technology Ltd. on Thursday became the first known company to suspend an IPO following the newly proposed changes. Since then, it has been reported that Chinese fitness app Keep and vegetable startup Meicai have both abandoned plans to sign up in the United States.
The new rules could impact Chinese tech companies like TikTok owner ByteDance Ltd. and logistics and on-demand delivery company Lalamove, which are considering IPOs.