China’s cyberspace regulator sets terms for IPOs

BEIJING – Chinese companies wishing to go public – including overseas – must comply with two main aspects of a wider set of regulations, the deputy minister of the country’s cybersecurity regulator said on Tuesday.

One is on national laws and regulations, said Sheng Ronghua, vice minister of China’s cyberspace administration. The other is to ensure the security of the national network, of “critical information infrastructures” and of personal data.

Comments about the importance of these two rules in particular come as political uncertainty this summer essentially halted Chinese listings in the United States, after an increase in overseas offerings earlier this year.

The remarks also come from the Cyberspace Administration of China, which has increased its influence in recent months. It ordered app stores to remove Chinese rideshare app Didi just days after its massive U.S. IPO in late June. The regulator also asked the subsidiaries of two other Chinese companies recently listed in the United States to suspend registrations of new users while under investigation to “prevent national data security risks.”

In late July, a source familiar with the matter said China Securities Regulatory Commission Vice Chairman Fang Xinghai told major investment banks that Chinese companies can still go public in the United States using the commonly used legal structure known as a variable interest entity structure – except national security. concerns.

Deputy Cyberspace Administration Minister Sheng addressed reporters in Mandarin on Tuesday at a press briefing on a new policy to protect critical information infrastructure, due to go into effect on September 1. .

As he pointed out, Article 2 of the policy defines these infrastructures as areas in which a malfunction or loss of data would endanger national security, the economy, people’s livelihoods and the interests of the people. public. These industries include public communication and information services, energy, transport, water supply, finance and utilities, according to the policy document.

The policy calls for a national security review of Chinese purchases of network products and services, with fines or detention for non-compliance.

Responding to a question about whether foreign ownership made a difference, Sheng said the form of corporate ownership should not define “critical infrastructure.”

“For a long time, we have actively supported Internet information companies to finance themselves and develop in accordance with laws and regulations,” he said, according to a translation from CNBC.