China targets technology companies with broader crackdown on foreign IPOs

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Mobile phone showing Didi Chuxing application and its stock price, Yichang, Hubei Province, China, July 6, 2021.

Costphoto | Barcroft Media | Getty Images

China’s cyberspace regulator said on Saturday that any company with data of more than one million users must undergo a security review before listing its shares overseas, expanding the crackdown on the large “platform economy”.

The China Cyberspace Administration (CAC), which posted the proposed rules on its website, said the security review will focus on the risks of data being affected, controlled or tampered with by foreign governments after an overseas listing.

Cyber ​​regulators in China are imposing stricter restrictions on data collection and storage. The authorities are also lobbying more broadly for companies to list locally.

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Two new sets of rules, the Data Security Act and the Personal Information Protection Act, which cover data storage and data privacy respectively, are set to go into effect this year.

Saturday’s announcement will also require companies to submit IPO materials that they plan to submit for review.

The security review, according to the CAC, will consider national security risks as “the risk of disruption to the supply chain due to political, diplomatic, commercial, and other factors,” and the risk of master data being maliciously used by foreign governments after its inclusion in foreign countries. “

The CAC is seeking public opinion on the proposed rules.

The notice comes after Chinese authorities launched an investigation into passenger services giant Didi Global for allegedly violating user privacy, just days after it was listed in New York.

Didi shares plunged 20 percent after news of the investigation and the company said its revenue would be affected.

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