China plans to order cybersecurity reviews for some firms

In the latest step to tighten its grip on its enormous technology sector, China announced on Tuesday
that it will implement new guidelines to boost government monitoring of plans by Chinese platform
firms to list on global stock exchanges.
The new guidelines, according to the Cyberspace Administration of China (CAC), go into effect on Feb.
15 and require platform firms with data on more than 1 million users to undergo a security review
before listing their shares outside of China.
“With stock market listings there is a risk that key information infrastructure, core data, important
data or a large amount of personal information could be impacted, controlled or maliciously used by
foreign governments,” said the CAC in a statement, reiterating a concern flagged in July when the
changes were first proposed.
In a second statement, the CAC said it will begin enforcing new restrictions on the use of algorithm
recommendation technology on March 1 in order to improve oversight of news organisations that use
it to disseminate information. Users will also have the option to turn off the service if they so desire,
according to the rules.
Both sets of laws were suggested last year and are expected to have a significant impact on a wide
range of businesses, including TikTok owner ByteDance, e-commerce behemoth Alibaba Group, and a
slew of other smaller entities.
ByteDance and Alibaba did not immediately respond to Reuters` request for a comment.
The CAC decision comes after a spate of regulatory changes in China over the last year that have
stifled corporations’ desire to list overseas, but bankers are hopeful that the new rules would provide
greater certainty in 2022.
The CAC did not say if the guidelines would apply to companies seeking Hong Kong listings.
However, lawyers and bankers claimed that, based on the guidelines’ phrasing, Chinese companies
seeking to list in the city with more than 1 million users would not be compelled to seek the
cybersecurity evaluation.
“Hong Kong is being treated as part of China, offshore though not foreign market, and this paves the
way for more deals to return to Hong Kong,” one investment banker at a Western institution told
Reuters, asking not be named as he was not permitted to speak to the media.
The Hang Seng Index in Hong Kong rose 0.06 percent after trading in the red for the majority of the
afternoon, but the city’s tech index fell 1.04 percent.
The operator of the Hong Kong stock exchange, Hong Kong Exchanges and Clearing Ltd, closed down
1.1 percent. Following the announcement, they dropped as much as 2.4 percent.
“If this is not retrospective then it would only affect listing aspirants and not companies already listed.
Having said that, companies in the latter camp already have a lot on their minds,” said Justin Tang,
head of Asian research at investment adviser United First Partners in Singapore.
The rules published did not specify whether the planned changes would be retrospective.