China indicates wider reduction of overseas lists after Didi’s IPO | Financial market news


According to the State Council of China, the rules for overseas listings will be reviewed and listed companies will be responsible for keeping their data safe.

China issued a major warning to its larger companies, promising to tighten oversight of data security and overseas listings just days after the contentious decision by Didi Global Inc. to be made public in the United States.

While China’s state council statement on Tuesday has been sparse in detail, it suggests Beijing is preparing to step up repression of its all-encompassing corporate sector, from real estate and fintech debt to antitrust and now cybersecurity.

According to the Council of State, the rules for overseas listings will be reviewed, while listed companies will be responsible for keeping their data secure. China also said it will intensify its regulatory oversight of companies listed on offshore markets.

The move comes after cyberspace regulator announced an investigation into Didi, which controls almost the entire Chinese market, and removed the company’s app from stores. Beijing’s strong response, which came just days after the $ 4.4 billion IPO, caused Didi’s shares to fall in U.S. trading on Tuesday. The latest statement marks an escalation in President Xi Jinping’s campaign to control the country’s technology companies – and their valuable data series -.

“It’s a big step from China, but on the other hand, it’s part of a series of events that started more than a year ago,” said Peter Garnry, head of equity strategy at Saxo Bank A / S in Hellerup, Denmark. “Uncertainty is still over to what extent all of this regulation will affect long-term profitability.”

U.S. stock markets remain a popular choice for Chinese entrepreneurs, especially in the technology industry, despite Beijing’s efforts to encourage companies to return home, including Hong Kong. Chinese companies raised $ 7.9 billion last month through stock sales for the first time, most since the IPO of Alibaba Group Holding Ltd. in September 2014, according to data collected by Bloomberg.

But U.S. exchanges are increasingly hostile to Chinese companies, which may suffer withdrawal if they refuse to hand over financial information to U.S. regulators. An effort by the U.S. Securities and Exchange Commission to access audits of overseas companies, which began under former President Donald Trump, continues under the Biden administration. Some Chinese companies have said China’s national security laws prohibit them from handing over audit documents to U.S. regulators.

The move could cause Chinese technology companies marketed in the U.S. to reconsider their lists. Charles Chao, president of Weibo Corp. and a state investor, are in talks to deprive Weibo, Reuters reported on Tuesday, citing people familiar with the matter. The structure of the agreement would allow the main shareholder Alibaba Group Holding Ltd. leave their participation, according to the report. “Speculation is not true,” a Weibo representative told Bloomberg News, who declined to elaborate.

Beijing may also be looking to close gaps that allow Chinese companies to list abroad without approval if they join overseas. Many technology companies like Tencent Holdings Ltd. and Alibaba are registered in places such as the Cayman Islands or the British Virgin Islands.

Beijing has become increasingly concerned about the amount of data that Didi and other technology companies possess. Didi, for example, has a wealth of sensitive information from half a million active annual users, mostly in China. Over the past year, the Xi government has tried to control this data, both to protect users from abuse and to find a way to use it to stimulate powerful economic growth rather than enrich a cohort of billionaires who it could challenge the communist party. authority.

China’s campaign to impose tougher controls on the nation’s tech companies was strongly demonstrated late last year when they got the $ 35 billion double quote from Ant Group Co. in Shanghai and Hong Kong.

The latest State Council statement makes special provisions for cross-border data monitoring, suggesting that the monitoring of confidential information has become one of the most important regulatory fields in China, said lawyer Xia Hailong. of the Shanghai-based law firm Shenlun.

“Since there is no mechanism for cross-border securities monitoring, conducting a data security review could serve as an effective tool for Chinese regulators to curb overseas listed companies,” he said. Xia.

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