The Chinese authorities have notified the country’s technology companies of the imminent introduction of new rules regarding the conduct of IPOs overseas. For large corporations like social networks or online retailers, this option for business development will simply not be available. The policy of “996” – 12-hour work shifts, six days a week, on which Chinese tech giants such as Alibaba and JD.com have been lined up, also sparked government dissatisfaction.
Chinese tech companies with large amounts of user data may be unable to conduct IPOs overseas. This is reported by The Wall Street Journal with reference to its own sources.
According to the publication, the country’s regulators have already contacted technology companies in China and notified them of the upcoming changes.
First of all, the authorities assured, the new rules will affect those who are trying to bypass existing laws and conduct an IPO abroad through a subsidiary that is registered outside the PRC.
At the same time, the China Securities Regulatory Commission assured business representatives that companies with less confidential data will continue to receive regulatory approval to place shares in other countries, subject to other laws and requirements.
In addition, according to Bloomberg, the Supreme People’s Court of China and the Ministry of Human Resources and Welfare issued a report today criticizing the “996” practice in Chinese companies. This is how China defines the policy of companies that force their employees to work from 9:00 am to 9:00 pm six days a week. This practice is especially common in technology companies, and Alibaba Group founder Jack Ma and JD.com CEO Richard Liu (Liu Qiangdong) publicly supported this practice, explaining that this is the only way Chinese technology companies can compete with Western ones.
The document notes that employers should not force their employees to work in excess of the norm, and cases when employees are forced to refuse extra payments for overtime hours are illegal.
The practice of working 12 hours a day is not called illegal by the Supreme Court and the ministry, but they mention several cases in which employers, including technology companies, were found guilty of violating labor laws.
The Chinese authorities have begun to exert serious pressure on the country’s technology sector since last fall. Many analysts believe that the first wave of pressure from the Chinese authorities on the technology business, which began at the end of last year, against the founder of the Internet giant Alibaba, Jack Ma.
Following the investigation, Alibaba was fined $ 2.8 billion for “abuse of dominance.”
A new phase of pressure on Chinese high-tech began in June, when SAMR launched an investigation into Didi Global, all applications of which were temporarily removed from the country’s online stores. Investigations were launched against other representatives of the Chinese IT sector. It was reported that ByteDance, which owns the popular social network TikTok, refused to conduct an IPO abroad, fearing sanctions from the Chinese authorities. Finally, according to Bloomberg, last week the Chinese authorities suspended the IPO of 42 Chinese technology companies at once, and on the exchanges in Shanghai and Shenzhen.
Tighter regulation is negatively affecting China’s tech sector quotes. So, since the beginning of the year, Alibaba shares have dipped by almost a third, Tencent – by 18.5%, and the Hang Seng technology index in Hong Kong sank 7.5%.
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