The Chinese Communist Party (CCP) plans to tighten domestic enterprises’ overseas share sales. The regime recently banned foreign listing firms that might cause national security concerns, as Bloomberg reported.

Any Chinese firms considering initial public offerings and additional share sales abroad will have to register with the China Securities Regulatory Commission, according to the commission’s consultation paper released on December 24th.

Bloomberg reported that these changes were the latest actions by Chinese authorities to suppress the New York-listed online ride-hailing giant Didi. After Didi’s Initial public offering (IPO) on Nasdaq in June, the Chinese regime has suspended all Chinese companies’ listings in the US.

The consultation paper stated that offshore listed firms that pose threats to the nation’s security are barred from share sales. Companies that provide critical data and personal information in overseas markets were considered to be raising cybersecurity concerns and would be subjected to security reviews—specifically, ones that provide critical data and personal info in overseas markets.

The authorities may divest domestic enterprises’ business and assets or take other effective measures to eliminate or avoid the impact of overseas issuance and listing on national security.

Before registering with the commission, companies are obligated to gain approval from industry regulatory authorities. Firms with property dispute problems and core technology are banned from overseas IPO. Companies with Chinese “variable interest entity” (VIE) structure are allowed to IPO if they meet the regulator’s requirements.

Since the beginning of 2000, most Chinese networking firms have followed the VIE structure to cope with the CCP’s rules on foreign-invested and offshore listings firms.

Those who violate the law are fined $1.57 million, or barred from operating.

The CCP’s latest scrutiny on networking firms came not long after the U.S. halted Chinese companies’ pending IPOs due to political and regulatory risks. The U.S. Securities and Exchange Commission (SEC) warned that investors might not realize they were purchasing shares in shell corporations rather than direct stakes in enterprises.

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