HONG KONG/BEIJING – Didi Global Inc, the ride-hailing behemoth, claimed a regulatory order to remove its app from Chinese app stores might damage income, while other freshly U.S.-listed Chinese corporations have also been the target of cybersecurity investigations. The Cyberspace Administration of China (CAC) issued the removal order on Sunday, only two days after the agency initiated a probe into Didi and less than a week after it debuted on the New York Stock Exchange.
Didi told Reuters on Monday that it had no idea the CAC would initiate a cybersecurity investigation or put a halt to new user registrations and app downloads in China before the initial public offering (IPO).
The CAC’s move comes amid a broader regulatory crackdown on Chinese internet giants, which began with the cancellation of an anticipated US$37 billion IPO by Alibaba fintech unit Ant Group 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 has been at the forefront of China’s regulatory blitz, and the decision against Didi is one of the CAC’s most high-profile moves since its inception in 2014, indicating an increasing emphasis on data protection for companies listed in the US.
The CAC also launched cybersecurity 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 Kanzhun Ltd and Full Truck Alliance, like Didi, went public in the United States last month. According to the investigation, Full Truck Alliance will halt new user registrations and will cooperate with the investigation. Kanzhun did not react to a request for comment right away. “One would imagine that a government eager to promote its indigenous champions would want to deal with these concerns in a fast and private manner,” said Zennon Kapron, head of research and consulting firm Kapronasia, in reference to the Didi and Ant investigations. “The fact that this isn’t occurring is a strong indicator that China wants to use these companies as a signal to other tech companies,” Kapron added.
DIDI’S DOLDRUMSSources told Reuters last month that Didi, which has a current market value of around US$75 billion, is also under investigation by China’s market regulator, the State Administration for Market Regulation.
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.
Analysts have predicted that Didi’s existing user base in China will not have a significant impact on earnings. Existing users are unaffected by the app’s discontinuation. Didi reported first-quarter sales of 42.2 billion yuan (US$6.5 billion), with its China mobility sector accounting for more than 90% of the total. It operates in 15 countries in addition to China, where it has a strong position in the ride-hailing sector. Didi, which collects a large quantity of mobility data for technology research and traffic monitoring, has stated that it will work to resolve any issues and ensure that users’ privacy and data security are protected. Didi’s apparent “big data analysis” capability, according to the Global Times, a tabloid published by the ruling Chinese 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.” “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. The move against Didi, as well as the country’s competition watchdog’s announcement of new measures to prevent illicit pricing operations on Friday, caused major Chinese internet giants, including Tencent Holdings Ltd and Meituan, to have their Hong Kong-listed shares plummet. 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. (One US dollar equals 6.4721 Chinese yuan) (Tony Munroe, Yilei Sun, and Scott Murdoch in Beijing and Hong Kong contributed reporting; Aakriti Bhalla in Bengaluru and Sam Nussey in Tokyo contributed additional reporting; Edwina Gibbs and Alexander Smith edited.)/n
