China targets US IPOs, algorithms and cloud in latest technology elimination

SHANGHAI, Aug. 27 (Reuters) – China has launched a multidisciplinary attack on its technology companies, threatening to curb its listing capacity in the United States, seeking to tighten regulation of its use of algorithms and set aside your cloud computing companies in a major city.

In another action amid a wave of regulations on the technology sector announced in recent months, Beijing has also cracked down on what it described as a “chaotic” culture of celebrity fans, imposing new restrictions on content already tightly controlled in China. Read more

The moves set aside the wings of major Chinese technicians such as Alibaba Group (9988.HK) and Tencent Holdings (0700.HK) and have invested investors, marking Chinese shares traded at home and abroad.

Chinese technology companies have raised billions of dollars in overseas listings, especially in the United States, as for years Beijing followed a more laissez faire approach to the industry.

Now, China is framing rules to ban Internet companies whose data is believed to pose a potential security risk from trading abroad, said a person familiar with the matter.

The new rules would also emphasize the legal responsibility of subscribers to quotes abroad and would require a more thorough disclosure of holdings for those with the so-called variable interest entity structure (VIE).

The VIE structure, widely used by technology companies, was created two decades ago to circumvent rules that restrict foreign investment in sensitive industries such as the media and telecommunications.

It gives companies more flexibility to raise capital out of supply through initial public offerings (IPOs), while ignoring the scrutiny and lengthy research that locally incorporated companies face.

CLOUD FLIGHTS

As China’s technology sector has grown in size and prominence, Beijing has been increasingly cautious with its influence and the mountains of data it controls.

In a move that underscores this concern, Tianjin, a 14 million city south of Beijing, told city-controlled companies to migrate data from clouds managed by private operators such as Alibaba and Tencent to a state system in September 2022. , a document dated 12 August. Read more

Shares of Alibaba, China’s largest cloud service provider, closed 4% in Hong Kong on Friday. Its shares traded in the United States fell more than 3% in pre-market trading in New York.

Alibaba Cloud, whose revenue is modest compared to the large e-commerce business of its parent company, has been largely promoting its cloud services. Last year he said he planned to invest $ 28 billion over three years in next-generation data centers.

Chinese technology stocks have seen tens of billions of dollars disappear from their stock market valuations since Beijing began its crackdown on the sector in November 2020 with the shocking shutdown of Ant Group’s IPO, which is announced as the largest stock sale in the world. Since then, the technology sector (.HSTECH) has fallen by about 20%.

The Chinese Cyberspace Administration said on Friday that it also tightened oversight of algorithms used by technology companies, telling them to act fairly and not use algorithmic models that entice users to spend cash on them. ‘a way that can alter public order.

The guidelines include a proposal to allow users to disable algorithm recommendation services, giving consumers a greater view of an area of ​​the Internet that has also been targeted by U.S. and European authorities.

“This policy marks the time when China’s technology regulation is not simply keeping pace with European Union data regulation, but has gone further,” said Kendra Schaefer, head of technology policy research. of the Beijing-based consulting firm Trivium China.

China also cracked down on what it described as a “chaotic” culture of celebrity fans, preventing platforms from posting popularity lists and regulating the sale of merchandise to fans. Read more

Online celebrity fan clubs have spread to China. Paper has projected that China’s “idol economy” could be worth 140 billion yuan ($ 21.59 million) by 2022.

Clubs have been criticized for their influence on minors and for causing social disorder in China, which already has strict rules on content, from video games to movies and music. Beijing censors everything it believes violates basic socialist values.

Reports from Tony Munroe, Ryan Woo, Colin Qian, Brenda Goh to Beijing, Zhang Yan to Shanghai, Bhargav Acharya to Bengaluru; Written by Edmund Blair; Edited by Carmel Crimmins

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