China aims to ban offshore IPOs for digital firms with data vulnerabilities

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According to a person familiar with the situation, China is drafting guidelines to prohibit internet companies whose data poses possible security threats from listing outside the country, including in the United States. The person, who declined to be identified because the topic is confidential, added that the restriction would also apply to companies that engage in ideological debates.

Beijing announced last month that it would increase oversight of all foreign-listed companies, a major regulatory shift that followed a cyber-investigation into Didi Global Inc. only days after its U.S. listing. An individual familiar with the plans stated that the Chinese securities regulator would increase its monitoring of abroad IPO-bound corporations and restrict those that collect enormous amounts of user data or create content that could pose potential security threats.

If they want to offer their shares outside of China, all internet companies will be requested to voluntarily register for reviews with the strong Cybersecurity Administration of China (CAC). After the cybersecurity watchdog’s clearance, corporations can submit an application to the securities regulator, the individual added. If necessary, CAC will consult with other relevant ministries and regulatory agencies.

Reuters’ request for comment was not immediately answered by the China Securities Regulatory Commission (CSRC) or the China Securities Advisory Committee (CAC). In recent months, Beijing has increased its hold on the country’s online platforms, including tightening oversight of abroad listings. The initiative is one of several measures being considered by Chinese officials at the moment. After years of a more laissez-faire approach, the campaign, which has shattered stocks and drastically hurt investor mood, has targeted unfair competition and internet companies’ handling of a huge cache of customer data. The Wall Street Journal was the first to report on the proposed laws that will prevent internet companies that keep a vast amount of user-related data from listing abroad.