China to order cybersecurity exams for some companies seeking overseas listings

SHANGHAI (REUTERS) – China’s cyberspace regulator on Tuesday, Jan.4, will implement new rules from Feb.15 that require platform companies with data for more than one million users to undergo a security review before listing their shares overseas.

The Cyberspace Administration of China (CAC) also said these companies should apply for cybersecurity reviews before submitting registration applications to foreign securities regulators, according to statements posted on its WeChat account.

Businesses will not be allowed to register overseas if the review reveals that national security could be affected, he said in a statement posted on his official WeChat account.

It was the latest move in a series of recent regulatory changes ordered by the Chinese government to tighten the rules governing offshore listings.

Hong Kong stocks weakened following news from ACC. The Hang Seng Index fell 0.36% at the start of trading on Tuesday, and the city’s technology index fell 1.32%.

Shares of Hong Kong Exchanges and Clearing Ltd, the operator of the Hong Kong stock exchange, lost 1.8% for the last time, after falling 2.4% after the announcement.

The CAC first proposed the rules in July, saying the security review will focus on the risks of data being affected, controlled or manipulated by foreign governments after overseas registrations.

New rules governing the use of algorithm recommendation technology will also be implemented from March 1, the ACC said in a separate statement.

These rules, which were first proposed in August last year, will require companies to give users the right to opt out of the service and will also strengthen oversight of information providers who use the technology.

Chinese cyberspace regulators are placing more stringent restrictions on data collection and storage. The authorities are also encouraging businesses to enter the internal market more broadly.

Two other new sets of rules, the Data Security Act and the Personal Information Protection Act, which respectively cover data storage and privacy, came into force last year.

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