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China's cyberspace regulator presents two main conditions for companies that want to go public

China's cyberspace regulator presents two main conditions for companies

August 26, 2021: -Chinese companies wanting to go public, including overseas, must comply with two main aspects of a more comprehensive set of regulations, the vice-minister for the country’s cybersecurity regulator said Tuesday.

One is the national laws and regulations, Cyberspace Administration of China vice-minister Sheng Ronghua said. The other is ensuring the security of the national network, “critical information infrastructure,” and personal data.

The reviews regarding the importance of these two rules, in particular, come as policy uncertainty this summer has halted Chinese listings in the U.S. after an increase in overseas offerings by this year.

The remarks come from the Cyberspace Administration of China, growing its clout in recent months. It ordered app stores to remove Chinese ride-hailing app Didi just days after its significant U.S. IPO in June. The regulator also told subsidiaries of two different Chinese companies currently listed in the U.S. to suspend new user registrations while undergoing a probe to “prevent national data security risks.”

In July, a source familiar with the matter said China Securities Regulatory Commission Vice Chairman Fang Xinghai told significant investment banks that Chinese companies can still be public in the U.S. using the legal structure known as the variable interest entity structure barring national security concerns.

On Tuesday, Sheng spoke to reporters in Mandarin at a press briefing on a new policy to protect critical information infrastructure.

As he refers to Article 2 of the policy defines the infrastructure as areas in which dysfunction or data loss would endanger national security, the economy, livelihoods of the people, and the public interest. These industries also include public communication and information services, energy, transportation, waterworks, finance, and public services.

The policy calls for a national security review of Chinese purchases of network products and services, with fines or detention to comply with the failures.

In response to if foreign ownership made a difference, Sheng said the form of business ownership should not define “critical infrastructure.”

“For a long time, we have actively supported internet information companies to finance themselves and develop according to laws and regulations,” he said, the CNBC translated.

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