Cyber-security review to be ordered by China for firms seeking overseas listings

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Cyber-security review to be ordered by China for firms seeking overseas listings
Cyber-security review to be ordered by China for firms seeking overseas listings

If the cyber-security review finds that national security could be impacted, companies will not be allowed to list abroad

New rules to be implemented from 15 February 2022 that require platform companies with data for more than one million users to undergo a cyber-security review before listing their shares overseas, said China’s cyberspace regulator on Tuesday.

The Cyberspace Administration of China (CAC) also said such firms should apply for a cyber-security review before submitting listing applications to foreign securities regulators, according to statements published on its WeChat account.

If the cyber-security review finds that national security could be impacted, companies will not be allowed to list abroad, it said in a statement on its official WeChat account.

It was the latest move in a series of recent regulatory changes ordered by the Chinese government to tighten the rules governing offshore listings.

Hong Kong stocks weakened on the CAC news. The Hang Seng Index fell 0.36 per cent in early trade on Tuesday and the city’s tech index lost 1.32 per cent.

Shares in Hong Kong Exchanges and Clearing Ltd, the operator of the Hong Kong stock exchange, were last down 1.8 per cent, after having fallen as much as 2.4 per cent following the announcement.

The CAC first proposed the rules in July, saying that the cyber-security review will put a focus on risks of data being affected, controlled or manipulated by foreign governments after overseas listings.

In a separate statement, the CAC said, new rules governing the use of algorithm recommendation technology will also be implemented from 01 March.

Those rules, which were first proposed in August last year, will require companies to give users the right to switch off the service and will also tighten oversight of news providers that use such technology.

On data collection and data storage, Chinese cyberspace regulators are imposing tighter restrictions. Also, authorities are more broadly pushing for companies to list domestically.

Two other new sets of rules, the Data Security Law and the Personal Information Protection Law, which cover data storage and data privacy respectively, went into effect last year.

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