The Dawning of a New Era: China's PE/VC Sector in 2021

Summary 

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• 2021 was a mixed year for China's PE/VC sector, beginning with change and ending with more certainty
• Key legislative changes in 2021 included an updated Negative List, new rules from the Cyberspace Administration of China, and a detailed set of proposed rules issued by the China Securities and Regulatory Commission
• There were also significant developments in relation to data protection and antitrust law last year
• 2022 is expected to provide further certainty, with gaps in regulation being filled by new guidelines

2021 was a year of both continuity and change in China's private equity/venture capital (PE/VC) sector.  The year began with headwinds in both China and the U.S. on the future of the status quo, and ended with certainty on both sides as to the future direction of travel.  On the Chinese side, the Cyberspace Administration of China (CAC) and the China Securities Regulatory Commission (CSRC) issued final and proposed rules regulating a previously lightly-regulated space, namely Chinese companies with offshore parent entities receiving non-Chinese investment and listing in the U.S.  In particular, on Dec. 24, 2021, the CSRC issued detailed proposed rules for a filing system whose required content includes a completed cybersecurity review and approval by the CAC (pursuant to its final and proposed rules) and approval from the regulator that regulates the applicant's prior business.  This was followed by the release of the Special Administrative Measures for Foreign Investment Access (Negative List) (2021 Edition) (外商投资准入特别管理措施 (负面清单) (2021年版)) by the Ministry of Commerce (MOFCOM) and the National Development and Reform Commission (NDRC) on Dec. 27, which contains an important provision on foreign participation in prohibited sectors.

A core concern for both the CAC and CSRC was the export of PRC-sourced data and potential access to that data by non-PRC regulators