China Plans Security Checks for Technology Companies Listed Abroad

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China On Saturday, it moved towards requiring domestic tech companies to undergo a cybersecurity check before going public on overseas exchanges; It was a step to close the regulatory loophole that allowed ride-hailing giant Didi to list stocks on Wall Street last week. A clean digital health bill from Beijing.

On July 2, two days after shares of Didi began trading on the New York Stock Exchange, China’s internet regulator. I ordered the company Stopping users from signing up and allowing the share price to drop while the authorities conduct a security review.

Chinese regulators have since Ordered Didi’s apps from mobile stores and fined for failing to give advance notice on some of its past merger deals, making clear their dissatisfaction with the company, which has 377 million annual active users of its ride-hailing service in China.

Data protection has been a main focus for Beijing, as China competes with the United States for high-tech leadership. Just as US officials are trying to ensure that Americans’ data is protected from the prying eyes of the Communist Party, Chinese officials want to ensure that domestic tech companies do not compromise their information about Chinese users when they go public overseas and do not succumb to foreign scrutiny. securities regulators.

China’s internet regulator, the China Cyberspace Administration, enacted its law. rules on security reviews last year as part of the framework to protect the country’s digital infrastructure.

These regulations did not require companies like Didi to undergo a formal security check before applying for an overseas IPO, but that would change under revisions. recommended by the agency Saturday.

The revised rules say a security review will be mandatory for any business that has information on more than a million users who want to list their shares abroad. Such companies will be required to submit purchasing documents and contracts, as well as materials related to their IPO.

Under the current rules, the security review aims to address national security and business continuity risks posed by servers, software, cloud services and other products used by major tech companies.

The revised rules add two more risks to the list: the possibility of “stealing, leaking, damaging and illegally using or moving abroad” important data, and the possibility of that data being “influenced, controlled or maliciously used by foreign governments.” overseas public offering

The Cyberspace Administration is accepting public comments on revisions until July 25.

Top Chinese politicians stated in a policy document this week He said they would seek to tighten control over companies listed abroad, an issue that the document framed as a national security concern.

For fast-growing Chinese tech businesses, a Wall Street stock sale has long been highly desirable to reward first-time employees and funders, while also gaining the approval of international investors. But Beijing makes it clear that none of this is as important as securing companies’ data and digital infrastructure.

After acting against Didi, Cyber ‚Äč‚ÄčManagement ordered this week three additional internet platforms – two for shipping customers with truck drivers and one for recruiting – for suspending user registrations and submitting for security reviews. Like Didi, the two companies behind these platforms, Full Truck Alliance and Kanzhun, recently went public in the United States.

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