China has proposed new rules that would require almost all companies seeking to list in foreign countries to undergo a cybersecurity review. This move will tighten oversight over its internet giants.
“In accordance with the “National Security Law of the People’s Republic of China”, “Network Security Law of the People’s Republic of China”, “Data Security Law of the People’s Republic of China” and other laws and regulations, our office has revised the “Cyber Security Review Measures” in conjunction with relevant departments, and now solicits public opinions from the public”, read the statement.
The report is being considered as one of the most concrete steps taken yet to restrain the ability of technology firms to raise capital in the US. This will be done through a so-called Variable Interest Entity model that the likes of Alibaba Group Holding Ltd. to Baidu Inc. and Didi Global Inc. have adopted.
Regulators are also considering requiring VIEs like Alibaba that have already gone public to seek approval for additional share offerings.
Feng Chucheng, a partner at research firm Plenum in Beijing, was quoted by Bloomberg saying, “These rules will push more Chinese internet firms to list in Hong Kong instead of in another country, to bypass such a review”. He added, “The one million-user threshold is very low and would basically apply to every internet company aspiring for an IPO”.