Thursday, August 05, 2021

business

China targets ride-hailing giant Didi in data crackdown after U.S. listing


China is widening a crackdown on tech companies, as Beijing grows wary of the sprawling reach and power of the countrys Internet giants and signals it is prepared to rein them in despite the financial disruption.

The country's regulators on Sunday ordered the removal of Didi Chuxing, China's equivalent of Uber, from domestic app stores, dealing a blow to the company just days after its landmark U.S. listing. On Monday, authorities expanded their sights to at least three other platforms, including truck-hailing apps and a recruitment service.

Didi will remain banned by app stores until further notice as it was found to have "illegally collected and used users' personal information" in a "grave violation of law and regulation," China's cyberspace regulator said in a statement on Sunday after a two-day cybersecurity review. Didi said Monday that it expects the app takedown to "have an adverse impact on its revenue in China," adding that the app would continue to operate but had suspended new user registrations.

"It's a bumpy ride for Didi," said Duncan Clark, a Beijing-based analyst and chairman of consultancy BDA China. "Now, Didi has been asked to put on the seat belt because authorities believe that it was going too fast and too far."

Didi, a Beijing-based company launched in 2012, raised $4.4 billion last week through an initial public offering in New York - the largest U.S. listing by a Chinese company since Alibaba's in 2014. The company, which was valued at almost $70 billion after its first day of trading in New York, boasts over 450 million users in China and more than a dozen other markets and is especially popular in China's larger cities.

The latest regulatory crackdown, which sent Didi shares tumbling, came after Beijing intensified its antitrust campaign against tech giants in recent months, including a record $2.75 billion fine against Alibaba in April. Under a new data security law that comes into effect in September, China plans to set up a "centralized, unified, efficient and authoritative" mechanism for information sharing and risk assessment.

The state-owned Global Times tabloid applauded the regulators' action, saying that it ensures that the government sets the rules in data collection, not industry leaders such as Alibaba or Didi.

"We still do not know how Didi Chuxing illegally collected users' personal information," the nationalist newspaper said in an editorial. "The state will never allow tech giants to collect more detailed personal information in their mega-databases than the state has of the Chinese people."

Renmin University of China senior researcher Dong Shaopeng told state media that Didi managed "large amounts of data that concerns national security" - such as transportation infrastructure and the flows of people and vehicles - and "might pose threats to China's national security." In 2015, Didi raised eyebrows after releasing a big data report of different government ministries based on civil servants' taxi use.

Didi is not the only company targeted in the latest campaign. The Cyberspace Administration of China said Monday that it was investigating three other platforms - online recruitment company Boss Zhipin and two Chinese truck-hailing apps owned by the New York-listed Full Truck Alliance - which were also ordered to suspend new user registrations, at least throughout the probe.

Shares of Chinese tech companies fell on Monday following the regulator's intervention. Tencent, which has a stake in Didi, slid nearly 4 percent in Hong Kong, while Meituan slumped 5.6 percent. Japan's SoftBank, which has a fund that owns stakes in Didi and Full Truck Alliance, also dropped more than 5 percent in Tokyo.

"China is obviously starting a new regulatory front on cybersecurity, which will make it more difficult for Chinese companies to list, or at least drive more investments to Hong Kong rather than New York," said Clark, the analyst. "Didi has connected people, but there's no guarantee against intervention, that's what the regulatory move wants to tell us."

Published : July 06, 2021

By : The Washington Post · Lyric Li, Pei Lin Wu