China’s securities regulator is weighing tighter rules for companies seeking to list in Hong Kong or overseas, a move that could hit technology firms already smarting from months of clampdowns, people familiar with the matter said.
The China Securities Regulatory Commission is considering proposals that would require firms seeking initial public offerings (IPOs) outside mainland China to submit listing documents to ensure they are compliant with local laws and regulations, the people said.
The scrutiny would also seek to prevent any leaks of sensitive data that might be of national security interest, the people added, requesting they not be identified as the matter is private.
Photo: AP
The discussions are preliminary and could be subject to change.
The commission did not immediately respond to a fax requesting comment.
The heightened regulatory concerns come as the US tightens restrictions on Chinese firms listed on its exchanges, with legislation that requires the companies to allow inspectors to review their financial audits.
China has long refused to let the US Public Company Accounting Oversight Board examine audits of firms whose shares trade in the US, citing national security interests.
The measures, if rolled out, could have far-reaching implications for a raft of upstarts that are on the verge of going public. Among them are Bytedance Ltd (字級跳動), which is said to be weighing a listing of some of its China units, and ride-hailing giant Didi Chuxing (滴滴出行), people familiar with the matter have said.
The changes could also ensnare Chinese firms that already trade in foreign markets, requiring them to submit filings to regulators as well, one of the people said.
China’s current rules require all locally registered companies and some firms with offshore registrations to seek approval from the securities watchdog when they list in Hong Kong or outside the country.
However, many Internet stars like Tencent Holdings Ltd (騰訊) and Alibaba Group Holding Ltd (阿里巴巴), registered in places like Cayman Islands or the British Virgin Islands, fall outside the scope of the current regulations. The new rules would seek to lay out more specific reporting guidelines and standardize them across firms, one of the people said.
It is unclear what impact any news rules might have for companies that operate a so-called Variable Interest Entity— a vehicle through which virtually every major Chinese internet company attracts foreign investment and lists overseas.
Regulators have issued a slew of measures placing greater scrutiny on the nation’s tech giants, curtailing their operations on everything from data collection and monopolistic practices.
Among the orders issued by financial regulators last month were new guidelines on securitizing assets and seeking overseas listings.
China has already tightened measures for listings on domestic exchanges, including Shanghai’s NASDAQ-style Star board. It has restricted listings of fintech companies, and banned IPOs by firms that operate mainly in real estate and sectors related to financial investment.
The clampdown on tech firms led to the postponement of a US$35 billion IPO by Jack Ma’s (馬雲) Ant Group Co (螞蟻集團) in November. On orders from regulators, Ant must drastically revamp its business and is to be supervised more like a bank, a move with far-reaching implications for its growth.
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