The stock market regulator of the Asian country is analyzing establishing the new rules that could begin to be applied in the last quarter of the year. The decision would frustrate many companies' plans to go public in New York.
According to The Wall Street Journal, China is considering new laws that would bar companies with a large number of sensitive user data from being made public in the United States, which is likely to thwart the ambitions of Chinese technology companies to go public. The foreigner.
In the last weeks, Officials at China's stock regulator informed some international companies and investors that the new rules would prohibit Internet companies that have used data from listing abroad., according to sources accessed by The Wall Street Journal (WSJ). According to the US outlet, regulators said the rules would apply to companies seeking initial public offerings abroad through units incorporated outside the country.
Officials with the China Securities Market Regulatory Commission (CSRC) said that companies with less sensitive data, such as those in the pharmaceutical sector, will continue to receive approval to list abroad.
It is believed that the new rules could help the Chinese regime exercise greater control over the corporate structure that large technology companies in the Asian country used to avoid restrictions on foreign investment. The leaders of the Xi Jinping administration consider sectors such as the Internet, telecommunications, and education to be sensitive for political or national security reasons.
Chinese tech giants such as Alibaba Group Holding Ltd., Didi Global Inc., and Tencent Holdings Ltd. have used a corporate structure, known as a Variable Interest Entity (VIE), to attract foreign capital. And they are listing abroad.
According to the new rules, China will also establish a mechanism that requires companies to obtain formal approval for IPOs (initial public offering) abroad from an inter-ministerial committee created in the coming months, according to information from The Wall Street. Journal.
Currently, private Chinese companies with VIE structures are not explicitly required to seek approval from the China Securities Market Regulatory Commission to go public in the United States. However, they usually do so if requested by regime officials.
According to WSJ sources, Chinese regulators are considering starting to apply the new rules in the fourth quarter of the year, asking some companies to delay their overseas IPOs until then.
Last July, the Internet watchdog published a cybersecurity review and specified that companies with personal data of at least one million users must request such a review before entering the foreign market. The decision followed Beijing's announcement to review the cybersecurity of Chinese companies that recently went public, including the giant DiDi.
In recent meetings with international companies and investors, the CSRC criticized the United States Securities Market Commission (SEC) plan to increase scrutiny of Chinese companies that sell shares in the North American country, according to sources familiar with the matter.
Chinese officials also rejected the SEC's failure to respond to their proposals on the use of the audit documents, which represented a vital piece of the discussion between the two regulators and triggered Didi's recent data security investigation.
Recently, SEC Chairman Gary Gensler said he had asked government agency staff to ask Chinese companies for information before approving regulatory documents that precede an initial public offering. According to The Wall Street Journal, he also urged a more detailed review of the files of companies with significant operations in China.
It is unknown whether the new rules will affect companies already listed on a foreign market under the VIE structure. In recent years, Chinese companies listed in New York, such as Baidu Inc., Took a secondary listing in Hong Kong amid tensions between the United States and China.