The draft rules outlined specific steps and materials for a cybersecurity review, including an analysis on national security by the company and all procurement documents, current or future agreements as well as IPO materials prepared to be submitted. There is no room for compromise," Liu said. "This is in line with the basic principles of safeguarding national information security. The threshold of a million users, as clarified by the new rules, means almost all platforms operating in China which aspire to sell shares abroad need to go through a cybersecurity review," Liu Dingding, a Beijing-based internet sector analyst, told the Global Times. "In the Chinese market, there are countless internet platforms that have stored the information of over 10 million or even 100 million users. Most notably among the draft revision released Saturday is that all internet product and service providers that collect data of more than a million users must file for review and approval before seeking an IPO abroad. It was the first time that the Cyberspace Administration of China (CAC) released a draft amendment and sought public opinion on the cybersecurity review measures since June last year, when the original measures became effective. Regulators' tightening scrutiny on internet firms, which have been inclined to seek IPOs in the US market over recent years, came at a crucial moment that the potential risks posed by data breaches have been amplified along with the value those companies generated as China pushes ahead with digitization in various industries, analysts told the Global Times, adding that it will be impossible now to bypass local regulations via overseas listings. It marked another crucial step in China's broader efforts to ensure data security amid growing China-US tensions as Washington continues to crack down on Chinese firms. In May, Reuters reported that Beijing was pressing audio platform Ximalaya to drop US listing plans and opt for Hong Kong instead, with one source at the time citing Beijing's concerns that US regulators will potentially gain more access to audit documents of New York-listed Chinese companies.Īnalysts also note the tougher stance coincides with new US regulations being rolled out that could see Chinese companies delisted if they do not comply with US auditing rules.China has tightened cybersecurity reviews for internet companies that seek IPOs in the overseas markets with a set of draft rules, including a new threshold that businesses holding data of more than a million users in China must undergo a regulatory review before applying for an overseas IPO, which indicated the country's resolve to rein in potential national security risks brought by domestic businesses that own oceans of data amid their cross-border operations. The tougher stance by the Cybersecurity Administration of China has been driven in part by concerns that the United States could gain greater access to data owned by Chinese firms - similar to concerns that the previous Trump administration had voiced about Chinese firms operating in the United States. So far this year, a record $12.5 billion by Chinese firms has been raised from 34 US listings, Refinitiv data shows, well up from the $1.9 billion from 14 deals in the same period a year ago.Įight Chinese companies including home service platform Daojia Ltd and Atour Lifestyle Holdings have made public filings with the Securities and Exchange Commission (SEC) to list in the US later this year, a review of the filings showed. US capital markets have been a lucrative source of funding for Chinese firms in the past decade, especially for technology companies looking to benchmark their valuations against listed peers there and tap an abundant liquidity pool. Morgan Stanley and Bank of America declined to comment, while CICC did not respond to a Reuters request for comment. Morgan Stanley, Bank of America, and China International Capital Corp Ltd (CICC) were the investment banks on the deal. LinkDoc did not immediately respond to a request for comment. The sources declined to be identified as the information has not yet been made public. The book closed one day earlier than planned on Wednesday, one of the three sources and a separate person said. It had planned to sell 10.8 million shares between $17.50 and $19.50 each.
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