China evaluates that companies that make IPOs in the US surrender control of their data: sources

China evaluates that companies that make IPOs in the US surrender control of their data: sources

By Julie Zhu and Scott Murdoch

HONG KONG, Aug 20 (Reuters) – Chinese regulators are considering pressuring data-heavy companies to hand over their management and oversight to third-party firms if they want to go public in the United States, sources said, as part of the unchecked scrutiny. Beijing’s precedents on private companies.

Regulators believe that bringing in information security firms, ideally backed by the state, to manage and monitor the data of IPO (Initial Public Offering) applicants could in fact limit their ability to transfer data from mainland China overseas, one of the people said.

That would help ease Beijing’s growing concern that a foreign listing could force Chinese companies to hand over some of their data to foreign entities and undermine national security, the person added.

The plan is one of the proposals Chinese regulators are considering as Beijing is tightening its grip on the country’s internet platforms, including an attempt to increase scrutiny of overseas listings.

The offensive, which has toppled stocks and severely undermined investor confidence, has focused primarily on unfair competition and the handling of massive amounts of consumer data by Internet companies, after years of a looser approach.

A final decision on the data transfer plan of the OPI-linked companies has not yet been made, said the sources, who asked to remain anonymous due to the sensitivity of the matter.

Regulatory officials have discussed the plan with capital market players, one of the sources said, as part of moves to strengthen supervision of all overseas-listed Chinese companies.

OPI advisers hope that a formal framework on the data transfer issue can be delivered in September, the source said.

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