China will do cybersecurity checks of some Companies :
China will do cybersecurity checks of some Companies :

China announced new guidelines on Tuesday that will increase monitoring of how its platform companies intend to list abroad or employ recommendation algorithms, further tightening Beijing’s grip on the country’s enormous technology sector.

The Chinese Cyberspace Administration (CAC) said that new rules would take effect on February 15 that will force platform firms with more than 1 million users’ data to undergo a security examination before offering their shares overseas.

In a separate statement, the CAC said that beginning March 1, it will implement new rules governing the use of algorithm recommendation technology, including requiring companies to give users the ability to turn off the service and increasing oversight of news organisations that use such technology to disseminate information.

Both sets of laws were suggested last year and are expected to have a significant impact on a wide range of businesses, including TikTok owner ByteDance, e-commerce behemoth Alibaba Group, and a slew of other smaller entities.

Reuters reached out to ByteDance and Alibaba for comment, but neither company responded quickly.

The CAC decision comes after a spate of regulatory changes in China over the last year that have stifled corporations’ desire to list overseas, but bankers are hopeful that the new rules would provide greater certainty in 2022.

The CAC did not specify whether the rules will apply to companies seeking listings in Hong Kong. But lawyers and bankers said based on its wording it appeared that Chinese companies with more than 1 million users seeking to list in the city would not be required to seek the cybersecurity review.

“Hong Kong is being treated as part of China, offshore but not foreign market, and this paves the way for additional deals to return to Hong Kong,” a Western investment banker told Reuters, declining to be identified because he was not authorised to speak to the media.

The Hang Seng Index plummeted 0.36 percent in Hong Kong, while the city’s tech index fell 1.44 percent.

The operator of the Hong Kong stock exchange, Hong Kong Exchanges and Clearing Ltd, was down 1.9 percent at the time of writing. Following the announcement, they dropped as much as 2.4 percent.

“If this isn’t retroactive, it will only effect people who want to be listed, not already-listed companies. Companies in the latter camp, on the other hand, already have a lot on their minds “Justin Tang, the head of Asian research at Singapore-based investment adviser United First Partners, agreed.

The guidelines did not clarify whether the anticipated modifications would be retroactive when they were released on Tuesday.


The CAC proposed the cybersecurity reviews in July, saying they would focus on the risks of data being affected, controlled, or manipulated by foreign governments after overseas listings

In comparison to the proposal published in July, Alex Roberts, who studies data policy at law firm Linklaters in Shanghai, said the revised guidelines appeared to have narrowed the scope of the enterprises likely to be affected by the revisions.

“The most significant change in these cybersecurity review measures appears to be the narrowing of the review’s application to only critical information providers, data processors that may impact national security, or platform operators holding over 1 million individuals’ personal data,” Roberts said, adding that the rules still do not provide enough specificity as to which companies will be affected.

“Given the current uncertainty of the review process, this ambiguity will be a real concern for successful multi-channel businesses in China’s digital economy.”

The CAC reforms follow a flurry of recent Chinese government actions aimed at improving oversight of Chinese businesses’ foreign listings.

Last week, China’s state planner stated that it would seek regulatory approval. for sensitive overseas Chinese listings in sectors including online news and publishing

Separately, the China Securities Regulatory Commission (CSRC) announced on Dec. 24 that businesses seeking to list overseas must first submit documents to the agency for registration, as part of a procedure that includes close collaboration among several regulatory organisations.

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