ByteDance, the owner of the popular short-video sharing application TikTok, scrapped its plans to list abroad after it was sent a warning by Chinese regulators, according to a Wall Street Journal exclusive.
Sources familiar with the matter said ByteDance was told to first address underlying data security risks with its network before it pushes through with its planning overseas listing. Sources said ByteDance was already considering listing abroad before it was approached by regulators.
The company's founder, Zhan Yiming, put on hold the plan in March after the company was contacted by officials from the Cyberspace Administration of China and the China Securities Regulatory Commission. The company was asked to focus first on addressing data security risks and other security issues, sources said.
Chinese ride-hailing company Didi Global allegedly also received a similar warning but pushed ahead with its plans to list abroad. Following its U.S. debut, China's cyberspace regulator launched an investigation into the company and banned its application from domestic application stores.
Government officials accused Didi of endangering the nation's national security, stating that the user data it had collected could fall into foreign hands. After the investigation announcement, Didi's stock price fell by more than 20%.
Since November last year, Chinese regulators have toughened their enforcement of rules aimed at reigning in the nation's largest technology companies. Apart from enforcing anti-monopoly regulations, authorities have also worked to mitigate data security risks.
Analysts said the Chinese government is concerned about the security of user data collected by technology companies, which they said could be compromised as a result of greater disclosure following an overseas listing.
On Tuesday, the CAC said it plans to further tighten oversight of overseas listings. The agency said it is currently drafting new rules that would require companies that collect data from more than 1 million users to first submit to a comprehensive security review before being allowed to list abroad.
The CAC said it will be leading the interagency reviews of the company once the new laws go into effect. In ByteDance's case, Chinese regulators did not order the company to delay its initial public offering. Sources said regulators only asked the company to first conduct its own security review before proceeding with its listing plans.