Chinese companies with big data to pass cybersecurity review before going public abroad

In China, the administration will ensure that companies managing data of more than 1 million users don’t threaten national security. New regulations on app and algorithm will also come soon in the middle of Chinese scrutiny on information and data management from companies.

Cyberspace administration of China building
The Cyberspace administration of China will require a cybersecurity review of companies before being traded on foreign stock exchange markets | © Thomas Peter, Reuters, 2021

On January 4, the Cyberspace Administration of China announced it would require companies handling personal data of more than 1 million users to undergo a cybersecurity review before an initial public offering (IPO) on foreign stock markets.

From February 15, companies will not be able to be listed overseas if the review concludes national security may be affected.

The regulation echoes concerns the administration raised last July about data processing from tech platforms.

Over the last few months, China has tightened its grip on tech companies in general, including how they collected data and handled it.

China tightened its grip on big data and tech companies

Recently, the Chinese company Aisino lost a contract with Chile over concerns of data safety concerns.

In July 2021, the Chinese ride-hailing company Didi held its IPO on the New York Stock Exchange. Few days later, China announced a cybersecurity review of the company and its data collection mechanism. New users were not able to register and the app was removed from Chinese app stores during that time.

The CAC also issued draft rules imposing security reviews of apps or technologies that could influence public opinion. App providers should not use their software to engage in activities that endanger national security or disrupt social order, the rules say.

It can be considered as another step for controlling the already tightly censored online activities and the spread of information.

Moreover from March, China will also regulate algorithms and recommendation technology, notably for greater oversight of news platforms. Users would have the possibility to switch the recommendation service.

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