China Targets U.S. IPOs, Algorithms, Cloud In Latest Tech Takedown
- ByStartupStory | August 28, 2021
China has launched a multi-pronged attack on its tech companies, to target U.S. IPOs, algorithms, and cloud. In another move amid a wave of regulations on the tech sector announced in recent months, Beijing has also cracked down on what it described as a “chaotic” celebrity fan culture, imposing new restrictions on already tightly controlled content in China. The moves further clip the wings of Chinese tech behemoths such as Alibaba Group and Tencent Holdings and have unnerved investors, hammering Chinese shares traded at home and abroad. Chinese tech firms have raised billions of dollars in overseas listings, particularly in the United States, as Beijing for years pursued a more laissez faire approach to the industry. Now China is framing rules to ban internet firms whose data is deemed to pose a potential security risk from listing abroad, a person familiar with the matter said.
The new rules would also put an emphasis on the legal responsibility of underwriters in overseas listings and require a more thorough disclosure of shareholdings for those with so-called variable interest entities (VIE) structure. The VIE structure, used widely by tech firms, was created two decades ago to circumvent rules restricting foreign investment in sensitive industries such as media and telecoms. It gives firms more flexibility to raise capital offshore via initial public offerings (IPOs), while bypassing the scrutiny and lengthy vetting that locally-incorporated companies face.
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