China to tighten rules for firms listed overseas to enhance data protection
Published: Jul 06, 2021 10:14 PM
Securities Illustration: VCG

Securities Illustration: VCG

China will strengthen rules and regulations for domestic businesses listed in overseas exchanges to enhance protection of data security and toughen crackdown on securities violations, according to a top guideline issued on Tuesday, the latest step in China's widening campaign to protect cybersecurity. 

Coming as Chinese regulators stepped up probe of some US-listed Chinese firms such as Didi Chuxing over user data security, the guideline further underscored China's firm resolve to tackle cybersecurity risks posed by listings of Chinese firms in overseas exchanges, analysts said. 

Specifically, China will improve rules and regulations for data security, cross-border data flow and management of classified information, according to the guideline jointly issued by the General Office of the Central Committee of Communist Party of China and the General Office of the State Council.

The guideline also vowed to amend the rules covering Chinese companies' overseas fundraising and IPOs, as well as take measures to cope with risks related to Chinese companies that are listed overseas.

The guideline came just two days after China's top cybersecurity regulator on Sunday ordered app stores to remove ride-hailing app Didi Chuxing, which just launched its IPO in the US last week, over cyberscurity issues.

"The Didi incident is only a flash point, reflecting regulators' efforts to address a series of national security issues exposed by the internationalization of China's digital industry," Hu Qimu, chief research fellow at the Sinosteel Economic Research Institute, told the Global Times on Tuesday.

In the process of listing overseas, the lack of relevant reviews may lead to related security problems, endangering public safety, or even national security, said analysts.

As of May 5, there were 248 Chinese companies listed on the three largest US exchanges, with a total market capitalization of $2.1 trillion, according to the US-China Economic and Security Review Commission. 

"Many internet technology companies have been listed overseas, giving foreign investors greater access to the core of their operations and easier access to relevant data. Under such circumstances, the economic and national security risks arising from the cross-border flow of data, a major product of the digital economy, cannot be ignored," Hu said.

The high-level guidance on Tuesday will mobilize all relevant regulatory departments and institutions to take swift measures to enhance protection of cybersecurity related to firms listed in overseas exchanges, analysts said. 

"Such a high-level document won't target a single enterprise," Wang Peng, an assistant professor at the Gaoling School of Artificial Intelligence at the Renmin University of China, told the Global Times on Tuesday.

"But Didi's security problems are certainly covered in the guidance. A large number of Chinese companies listed overseas and internet innovation enterprises are actually faced with the same data security problems as Didi," Wang said.

Apart from enhancing data protection, China will also impose tougher penalties for securities crimes, while enhancing the quality and efficiency of criminal investigations of major cases, according to the guideline on Tuesday.