October 26, 2021

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China wants to ban tech companies that handle large amounts of data from releasing it to the public in the United States

China wants to ban tech companies that handle large amounts of data from releasing it to the public in the United States

China She has plans, according to The Wall Street Journal, from Ban large companies in the country who – which Handling large amounts of data sensitive consumers Released to the public in the United States. Among them, of course, are the big tech companies, whose interests in going public in other countries will be thwarted.

In recent weeks, several officials from the Chinese market regulator have told some international companies and investors that the new rules they are preparing will prevent companies with data related to their users from listing in other countries. According to regulators, the rules target companies seeking to go public with an initial public offering (IPO) outside of China.

However, several officials from the China Securities Regulatory Commission have confirmed that companies with less sensitive data, such as those in the pharmaceutical sector, will still get approval from the Chinese regulator to go public across the border.

These new regulations are prepared by the Chinese government They will raise the level of control over the corporate structure of big technology companies Complex, and they use it to get around restrictions on foreign investment. China’s leaders believe that various sectors, such as the Internet, telecommunications and education; They are very sensitive, due to political or national security concerns. This is why they want to exercise more control over them.

This structure, known as Variable Interest Entity (VIE)It is used to attract foreign capital and list it on foreign stock exchanges. It is used by the country’s leading technology giants, such as Alibaba Group, Didi Global and Tencent Holdings. But with the new rules, China will create a mechanism that will make it necessary for companies to obtain formal approval for an offshore IPO, which they will have to request before a committee made up of members from different ministries and will be set up in the near future. Months. In addition, the committee will include members from CSRC, China’s Internet regulator.

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Currently, private Chinese companies using the VIE structure, which allows companies to register in third countries and thus receive foreign investment, are not explicitly required to be certified for an initial public offering in the United States, although many do if required by government officials. . But after the new normal comes into effect, which everything indicates will be in effect during the last quarter of this year, they will have to enforce it compulsorily. Currently, many of them have already been asked to delay their initial public offering in the US until then.

Last July, the Chinese entity that actually regulates the Internet put suggestion For a cybersecurity review, it is clear that companies with personal data of at least one million users should do so Request a cybersecurity review before it is released to the public outside China. But it seems that from now on they will have to proceed with only one of the actions, and in many cases they will not get permission.