Chinese companies seeking to list overseas will be subjected to regulatory screening by Beijing authorities if they have 1 million or more users with registered personal information, the country’s internet regulator said on Saturday.
The decision marks China’s first big move in its crackdown on offshore listing by Chinese companies. China is home to a number of companies with millions of registered online users. The clampdown will likely affect many companies and cast a shadow over the country’s tech sector.
On Saturday, the Cyberspace Administration of China began taking public comments regarding the revision of its network safety review measures. The revised proposal includes a new clause which states that companies holding the personal information of over 1 million individuals must undergo a security review when listing overseas.
Chinese companies will also be required to submit materials regarding their initial public offerings.
A “special review,” which is conducted when there is a disagreement among authorities, has in the past been completed within 45 days but will now be extended to three months, as China aims to tread carefully in its evaluations.
Beijing has already made multiple investigations into Chinese companies listing overseas.
Chinese authorities launched a probe into ride-hailing giant Didi Global’s app this month, and suspended downloads over data law violations following its IPO on the New York Stock Exchange. The cyberspace regulator has also announced national security-related reviews of two more Chinese companies that recently made their public debuts in the US.
Some media reports have said that Chinese podcast and audio app Ximalaya has scrapped plans to list on the US stock market after pressure from Beijing. The company has more than 200 million monthly active users and holds a large amount of personal information, including voiceprint data.
China’s online education app Zuoyebang has also been reported to be considering a US IPO. The company, which is backed by SoftBank Group and Alibaba Group Holding, has over 100 million monthly users and holds a lot of personal information on children.
China’s crackdown is accelerating amid growing tensions between Beijing and Washington, especially in an age where data can determine the competitiveness of companies and nations. However, there could be risks in excessively restricting companies, as it could undermine their potential growth.