Citing cross-border data transfer and privacy concerns, China promises security blitz on securities
Beijing wants tech companies that list offshore to get serious about compliance
Infosec concerns have led China’s government to apply closer scrutiny to Chinese companies that list and send data offshore, according to a document written by China’s State Council cabinet and the Communist Party’s General Secretary.
“For a long time, the low cost of illegal securities has plagued the development of the market,” states the Opinions on Strictly Cracking Down on Illegal Securities Activities in Accordance with the Law document in state-sponsored Xinhua News.
The document explains that new legislation will focus on cross-border data flows and management of sensitive data — particularly related to issuance and listing of overseas securities.
Next year, Beijing plans to establish a judicial system, law enforcement capability and coordination mechanism to enforce the crackdown, and bring order to the capital market.
By 2025, China aims to have “significantly improved judicial transparency, standardization and credibility of securities law enforcement,” among other lofty and vague goals. A coordinated working group to combat illegal activities is also proposed, but not assigned a timeline.
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The tougher stance on Chinese tech companies comes as no surprise, given Beijing’s last-minute halt of a Shanghai IPO for Alibaba affiliate Ant Group in November 2020, and this week’s ban on ride hailing app DiDi Chuxing just after the company’s US stock market debut.
A day after the Cyberspace Administration of China (CAC) action against DiDi Chuxing, the government internet regulator announced reviews of more apps that recently floated in the USA.
According to Xinhua, the China Securities Regulatory Commission handled 262 major cases between 2019 and 2020 — more than doubling its actions in the prior year.
The government is expected to escalate penalties associated with regulatory issues incrementally, with what it refers to as a “multi-level accountability system” — comprised of administrative punishment, criminal accountability, civil compensation, and integrity supervision. ®