CHINA (PRC FIRMS): An Introduction to Technology, Media, Telecoms (TMT)

Overview of Regulatory Policies on TMT Industry in PRC

The information-driven, consumer-oriented Internet has moved from the stage of the incremental competition to the stage of the stock competition. With the support of capital and the impact of epidemics, the superimposed effect of scale economy, scope economy and network economy of the consumer Internet platform has accelerated the centralization and top-oriented development of the Internet industry. At the same time, the growth points and hot spots of the Internet industry are also gradually transitioning from the model of “to C” to “to B”. At the level of PRC policy, reducing the profits and monopolies in the fields of real estate, finance, education and the Internet, as well as the pressure and costs on the people’s livelihood and the real economy therefrom in the past, and the government is vigorously developing the manufacturing industry, hard science and technology. The real economy, the new energy, the new infrastructure and the capital market have become the guidelines of the new stage.

Therefore, at this stage, the internet platform economy has been embodied in the trend of policies and regulations pursuing anti-monopoly and common prosperity, and the data compliance and data security review of the internet industry have received unprecedented attention. For example, in terms of anti-monopoly, the Anti-monopoly Guide of the Anti-monopoly Commission of the State Council for the Platform Economy Sector, and the Opinions on the Strengthening Anti-monopoly and Promoting the Implementation of Fair Competition Policies have been promulgated, and anti-monopoly investigations and penalties have been carried out and imposed against some platform-based Internet enterprises. For Internet enterprises’ data collection, storage, transmission and use, the corresponding regulatory regulations have become clearer. The Cybersecurity Law has been implemented for many years, and the Measures for Cybersecurity Reviews, the Personal Information Protection Law of the People's Republic of China and the Data Security Law of the People's Republic of China came into force in 2020 and 2011 respectively. The Cyberspace Administration of China has also promulgated the Measures for Cybersecurity Reviews (Revision Draft for Comment) and the Measures for Security Assessment of Cross-border Data Transfer (Draft for Comments) and solicited public opinions. Data regulation and data compliance have become the primary task of Internet enterprises which involving a large amount of data.

With respect to the capital operation of Internet enterprises, from the perspective of China, the Explanation of the State Council of the Administrative Provisions on the Overseas Issuance and Listing of Securities by Domestic Enterprises (Draft for Comments) (the “Draft”) has made adjustments to the overall regulatory ideas on the overseas listing of China Concept Stocks. Previously, the Big Red Chips Structure listings would be subject to the approval of Chinese regulatory authorities, the H-shares listings would be subject to the regulatory filing with the International Department of the China Securities Regulatory Commission (the “CSRC”) in the form of a so-called “small road pass”, and the Small Red Chips Structure listings would not be subject to the approval of Chinese regulatory authorities. The Explanation to the Draft has changed the current regulatory structure, which would cover all the current forms of overseas listings, subsequent issuances of additional shares, issuances of shares to purchase assets, etc. All forms of the overseas listings would be subject to governmental filing, which would be the filing with the CSRC in accordance with the Administrative Measures for the Filing of the Overseas Issuance and Listing of Securities by Domestic Enterprises uniformly. With regard to the US market, the effectiveness of the Holding Foreign Companies Accountable Act and its implementation regulations, as well as a series of regulatory Q&A from the SEC on the regulatory compliance and VIE compliance of China-based operating companies and the relevant industry, have had certain negative impact on the China-based operating Internet companies listed in the United States. The regulations and measures also put pressure on the primary market valuation of China-based operating Internet companies that prefer listings in the US. The lowering of the existing threshold in the secondary listing rules of the Hong Kong Stock Exchange has facilitated the secondary listing and expansion of financing channels in Hong Kong for these companies.