Chinese internet companies might no longer be able to opt for overseas initial public offerings (IPOs). China reportedly is preparing to ban companies that hold potential security risks in its data from overseas IPOs.
An anonymous source familiar with the matter told Reuters that China might also impose the overseas IPOs ban on companies involved in ideology issues. Additionally, the ban includes IPOs in the United States.
A look into the ban and rules related to overseas IPOs
Beijing has been planing to tighten the supervision of all firms listed offshore since last month. The plan came after Didi Global Inc had to under a cybersecurity investigation just days after its US listing.
In accordance with the planned rules, the Chinese securities regulator will implement tighter inspections on overseas IPO-bound firms.
The ban will fall on companies that store a vast amount of users data. Similarly, China is considering banning firms that create content that could possibly pose security risks from listing outside the country as well.
Overseas IPOs for internet firms, however, are not exactly impossible. The source further added that internet firms that look to list their shares outside China will need to voluntarily apply for reviews with the powerful Cybersecurity Administration of China (CAC).
The review will be conducted by CAC and, if necessary, other relevant ministries and regulators, the person continued. Once the firm received approval from the cybersecurity watchdog, the said companies may submit an application to the securities regulator.
Upon Reuters’ request for comment, The China Securities Regulatory Commission (CSRC) and CAC didn’t give an immediate response.
The plan is one of several proposals that Chinese regulators considered adopting.