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China to tighten overseas IPOs, may ban some on national security

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(Bloomberg) – China plans to tighten controls on overseas sales of shares by domestic companies and ban those whose listing could pose a threat to national security.

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All Chinese companies seeking initial public offerings and additional overseas share sales should register with the China Securities Regulatory Commission, according to a consultation paper it released on Friday evening. .

Under the proposals, companies whose overseas listings could threaten national security are banned from selling shares, and companies whose operations raise cybersecurity concerns would go through security reviews.

Improving supervision of listed companies abroad comes against the backdrop of opening up capital markets, and regulation should facilitate healthier, longer-term and sustainable development, the CSRC said. The opening direction remains intact.

The changes would be the latest move by President Xi Jinping’s government to crack down on overseas listings following the New York City IPO of ridesharing giant Didi Global Inc., which took place despite the claims. regulatory concerns. Authorities have since taken steps to stop the flow of companies seeking to go public in the United States, shutting down a path that has generated billions of dollars for tech companies and their Wall Street backers.

Didis’ listing in the United States came just as Xi was looking for ways to control the vast amounts of data held by Chinese tech giants, in part to ensure that the ruling Communist Party distributes the wealth. beyond a small circle of billionaires – a campaign to create common prosperity.

China’s increased regulatory oversight has been echoed by actions taken in the United States. direct participations in companies.

China to close loophole used by tech companies for overseas IPOs

Companies involved in major disputes at home over core assets or technology will also be banned from listing abroad, the regulator said. The CSRC would also require companies in certain industries to obtain approval from industry regulators before registering with the securities regulator.

Firms using the so-called variable interest entity (VIE) structure would be allowed to conduct IPOs overseas after meeting compliance requirements, according to the CSRC.

The CSRC is seeking public opinion on the draft rules until January 23.

Other key points from the consultation document included:

  • Authorities can order companies to divest domestic assets to prevent their overseas IPOs from harming national security

  • Companies providing key data and personal information in offshore markets must comply with related regulations

  • Companies that fail to comply with the registration rules face fines of up to 10 million yuan or suspension of their activity and license.

  • CSRC to grant unspecified grace period to companies already listed abroad in terms of compliance with new requirements

(Updates with more context and details.)

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