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China broadens offshore company data crackdown

By Mensholong Lepcha

01:29, 12 July 2021

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China’s cyber-security watchdog will broaden its crackdown on offshore listings, ruling that companies handling personal information of more than one million users must undergo a security review before listing abroad.

The Cyberspace Administration of China (CAC) released a statement over the weekend announcing a number of security measures focused on assessing supply chains and data processing activities in order to prevent “national security risks” that may arise from overseas listings.

The proposed rules will focus on risks of Chinese user data being controlled and used by foreign governments, the cyberspace regulator said in the statement.

Cyber-security crackdown

Lately, the Chinese government has been reining in established internet companies that handle troves of personal user data. Last week, Beijing launched a cyber-security investigation into recently-listed Didi Global over its handling of customer data. The ride-hailer’s apps were removed from China’s smartphone app stores and it was ordered to suspend new user registrations. The probe was later extended to US-listed Kanzhun and Full Truck Alliance.

Local media reported last week that Beijing was looking to tighten regulation of cross-border data flows and amend overseas fundraising rules. The government will also scrutinise funding sources and leverage ratios of companies, it was reported.   

In its recent statement, the CAC said companies that store and process user information must undergo cyber-security measures.

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National security risks

Companies planning to list overseas will need to submit IPO materials and an analysis report on factors that could affect national security, the regulator added.

The CAC said it seeks public feedback regarding its cyber-security measures.

The latest move from China will affect the 248 China-based companies currently listed on the three largest US exchanges and a further 17 proposed Chinese IPOs in the pipeline for the US in 2021.

On 8 July, healthcare IT firm LinkDoc Technology was set to become the first company to shelve its US IPO plans, according to a Reuters report.

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Read more: China extends crackdown to all overseas-listed internet firms

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