BEIJING – Didi Global has claimed that a regulatory order to delete its app from Chinese app stores could damage income, while other recently US-listed Chinese companies have also been subjected to cybersecurity inquiries. The Cyberspace Administration of China (CAC) issued the takedown order on Sunday (July 4), only two days after the regulator began an investigation into the ride-hailing behemoth and less than a week after the company debuted on the New York Stock Exchange.
In China, the Didi app has been suspended because to data security concerns.
It also comes amid a broad regulatory crackdown on domestic internet firms, focusing on anticompetitive behavior and data security, which began with the cancellation of Alibaba fintech unit Ant Group’s planned US$37 billion IPO late last year.
“Both the Ant IPO cancellation and this action on Didi illustrate that IPOs in China can be highly perilous, revealing one’s scale and activities and inviting regulatory scrutiny,” said Martin Chorzempa, senior fellow at the Peterson Institute for International Economics.
The CAC launched investigations into Zhipin.com, an online recruiting company, and Huochebang and Yunmanman, two truck-hailing companies that have merged to become Full Truck Alliance, on Monday. Zhipin.com’s owner Kanzhu Ltd and Full Truck Alliance, like Didi, went public in the United States last month.
After discovering that Didi had illegally gathered users’ personal data, the CAC stated it has ordered app vendors to remove Didi’s app from their stores.
“The Company expects the app shutdown to have a detrimental impact on its revenue in China,” Didi stated in a statement, but did not specify how much.
Because Didi’s existing user base in China is so large, analysts do not expect a significant drop in earnings. Existing users are unaffected by the app’s discontinuation. Didi also stated that it will work to resolve any issues and will safeguard consumers’ privacy and data security.
According to Reuters last month, Didi is also under investigation by China’s market regulator, the State Administration for Market Regulation.
Didi recorded revenue of 42.2 billion yuan (US$6.5 billion) for the three months ending March 31 in a June filing. Its China mobility section contributed 39.2 billion yuan, while its foreign business contributed roughly 800 million yuan. Didi operates in 15 countries in addition to China, where it has a commanding position in the ride-hailing business. Didi’s apparent “big data analysis” capability, according to the Global Times, a tabloid published by the ruling Communist Party’s official People’s Daily newspaper, could put consumers’ personal information at risk. In an opinion piece, it stated, “No Internet behemoth can be permitted to become a super database of Chinese people’s personal information that has more details than the country, and these corporations cannot be allowed to utilize the data whatever they please.” Following the revelation of the CAC examination, Didi’s stock dropped 5% last Friday, valuing the company at $75 billion. “We follow strict protocols in collecting, sending, storing, and using user data pursuant to our data security and privacy rules,” Didi wrote in its IPO prospectus. On Saturday, a top Didi executive stated that the business retains all China user and road data on Chinese servers and that it is “absolutely not possible” for the company to send data to the US. On Monday, SoftBank Group Corp’s Vision Fund unit, which owns investments in both Didi and Full Truck Alliance, saw its stock drop 5% in Tokyo./n
