China intends to prohibit foreign IPOs for tech companies that pose a data security concern: source

According to a source familiar with the situation, China is drafting guidelines to prevent internet companies whose data poses significant security hazards from listing outside the nation, including in the United States.

The ban is also expected to be enforced on companies that deal with ideological concerns, according to the source, who did not want to be identified because the matter is confidential.

Following a cybersecurity investigation into ride-hailing giant Didi Global Inc (DIDI.N) only days after its U.S. listing, Beijing announced last month that it aimed to increase control of all companies listed offshore.

According to the individual, the Chinese securities regulator would strengthen its monitoring of foreign IPO-bound enterprises and prohibit those that collect large amounts of user data or create content that could pose security issues.

If they want to offer their shares outside of China, all internet companies will be asked to voluntarily file for review with the strong Cybersecurity Administration of China (CAC), according to the individual.

The CAC will perform the evaluation alongside other relevant ministries and authorities if necessary, the person said, adding that corporations will be able to submit an application to the securities regulator after receiving permission from the cybersecurity watchdog.

The China Securities Regulatory Commission (CSRC) and the China Banking Corporation (CAC) did not immediately react to a request for comment from Reuters.

The suggestion is one of several being considered by Chinese regulators as Beijing has tightened its grip on the country’s online platforms in recent months, including a focus on international listings.

After years of a more laissez-faire attitude, the crackdown has shattered stocks and seriously hurt market sentiment, focusing in particular on unfair competition and internet companies’ handling of a vast cache of customer data.