According to Reuters sources, Chinese regulators want the regulation to limit the companies’ ability to transfer Chinese onshore data abroad in breach of the country’s national security laws.
Sources expect a final decision and a formal framework for the data handover plan to be ready by next month.
The China Securities Regulatory Commission (CSRC) and the Cyberspace Administration of China (CAC) did not respond to Reuters’ requests for comment.
The reported plan is one of a number of proposed steps to broaden state regulation over the country’s tech sector, including curbing unfair competition and probing companies’ handling of consumer data, as well as tightening scrutiny of Chinese firms’ overseas listings. Last month, CAC proposed a draft regulation subjecting firms with more than one million users to security reviews before listing abroad.
China’s National People’s Congress this week passed a law on the protection of online user data privacy. The regulation instructs tech firms to ensure secure storage of user data and introduces conditions under which companies can collect personal data, including mandatory individual consent. The regulation will come into force on November 1, according to state media outlet Xinhua.
Beijing’s regulatory moves have sent Chinese tech stocks stumbling amid weakening investor sentiment. Tech stocks plunged this week both in Hong Kong and in mainland China, with Hong Kong’s benchmark index dropping 5.8% to its lowest since March 2020, when the Covid-19 pandemic panic sowed panic in financial markets.
The Shanghai Composite index dropped 1.1% to its lowest close in more than two weeks. Among the major tech stocks to drop were e-commerce giant Alibaba, whose Hong Kong shares fell 2.6% to a record closing low, slashed by half from its October 2020 peak. Internet giant Tencent touched a 14-month low and food deliverer Meituan hit a one-year low.
In total, over $560 billion in market value was wiped off Hong Kong and mainland China exchanges this week with investors unable to predict which sectors regulators will target next.
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