NEW YORK (Reuters): China is constructing rules to ban internet companies whose data poses potential security risks from listing outside the country, including in the United States.
The ban is also expected to be imposed on companies involved in ideology issues, said the person, declining to be identified as the matter is private. Beijing said last month it planned to strengthen supervision of all firms listed offshore, a sweeping regulatory shift that came after a cybersecurity investigation into ride-hailing giant Didi Global Inc just days after its US listing.
Under the planned rules, the Chinese securities regulator would tighten scrutiny of overseas IPO-bound firms and ban those that collect vast amount of users data or create content that could pose possible security risks, said the person.
All internet firms would be asked to voluntarily apply for reviews with the powerful Cybersecurity Administration of China (CAC) if they aim to list their shares outside China, said the person.
CAC would conduct the review, if necessary, with other relevant ministries and regulators, the person said, adding after the cybersecurity watchdog’s approval companies would be allowed to submit an application to the securities regulator.
Read more: China steps up tech scrutiny with rules over unfair competition
The China Securities Regulatory Commission (CSRC) and CAC didn’t immediately respond to Reuters request for comment. The plan is one of several proposals under consideration by Chinese regulators as Beijing has tightened its grip on the country’s internet platforms in recent months, including looking to sharpen scrutiny of overseas listings.
The crackdown, which has smashed stocks and badly dented investor sentiment, has particularly targeted unfair competition and internet companies’ handling of an enormous cache of consumer data, after years of a more laissez-faire approach.
The Wall Street Journal newspaper first reported the new rules that would prohibit internet firms holding a swathe of user-related data from listing abroad.
The rules being drafted would also put an emphasis on the legal responsibility of underwriters in overseas listings and require a more thorough disclosure of shareholding for those with so-called variable interest entities (VIE) structure.
