Beijing further tightens its grip on local web giants with 'Network Security Review Measures'

More crackdowns on tech companies planning an IPO, as foreshadowed by the Cyberspace Administration of China

The Cyberspace Administration of China (CAC) has announced further restrictions for Chinese tech companies, including a compulsory security audit for companies with more than one million registered users that plan to list overseas.

A notice posted to the CAC web site on Saturday solicited public opinions on its “Network Security Review Measures”. In addition to the security review of companies with more than one million users listing overseas, the measures include a requirement for extra material submission for IPOs, and extends the amount of time a disagreement with authorities can be reviewed from 45 days to three months.

The notice also describes a regime of network security audits that will see different government agencies review web companies’ operations.

The CAC has recently tightened the reins on tech companies, infosec and data compliance.

Last week Beijing released a document foreshadowing legislation that will focus on cross-border data flows and management of sensitive data – particularly for companies listing overseas – plus a judicial mechanism that will enforce it.

Also last week, the CAC announced it will continue to review apps whose developers have recently floated in the USA, banning Chinese ride hailing app DiDi Chuxing from local stores days after its IPO.

According to government agency China Internet Network Information Center (CNNIC), China boasted 989 million internet users at the end of 2020.

An increasing number of Chinese have turned to apps during the pandemic, bringing the threshold of one million users into reach for more companies than ever.

The CNNIC reported that between March and December 2020, 72.15 million more Chinese were shopping online and 76.33 million more were streaming videos. For the Middle Kingdom, this translates to 94 per cent of all internet users watching videos online and 79 per cent shopping online.

By way of comparison, Weibo boasted 521 million monthly and 225 daily active users in December 2020 and Tencent’s WeChat (Weixin)’s monthly active users [pdf] reached more than 1,241 million in Q1 2021. ®