We are taking a deep dive to understand what’s going on with Didi Chuxing and other Chinese tech firms.
Before we get into the article, we need to know what Didi Chuxing is? It is the biggest ride-hailing company in China, and it bought Uber’s operations in China five years ago. The company had a blockbuster IPO on June 30, and it was the second-biggest share sale in the U.S. by a company based in China. Didi has a market value of around $68 billion.
What Happened?
Earlier on Sunday, China’s cyberspace regulator, Cyberspace Administration of China (CAC) ordered smartphone app stores to stop offering the app of Didi Global Inc. This move by the regulator comes after finding that the ride-hailing company had illegally collected the personal data of the users. The CAC said that it had told Didi to make changes to comply with Chinese data protection rules.
Being China’s top ride hailing company, Didi has access to massive amounts of user data. Global Times, mentioned by Bloomberg, on Monday warned that Didi’s information hoard posed a thread to individual privacy and national security, particularly since its top two shareholders are SoftBank Group Corp and Uber Technologies and both of these are foreign companies.
Didi responded by saying that it had stopped registering new users and would remove its app from app stores. The company added that it would make changes to comply with rules and protect the rights of its users.
The Investigation
This order to stop smartphone app stores from offering Didi app comes after CAC announced an investigation into the company on Friday. News of this probe pushed down the company’s shares by 5.3% to $15.53. The regulator said that it will begin a cybersecurity review of the firm to prevent data security risks, safeguard national security and protect the public interest.
Two days after the announcement, the regulator said that the company had committed serious violations in the collection and usage of personal information. At present, we do not know what the probe focuses on and when or where the alleged violations occurred, or whether there will be more fines to come in the future.
Zooming Out
According to an article by The Wall Street Journal, China’s regulators have been clamping down on technology companies over the past several weeks. The regulators have been cracking down on these firms for a range of violations, with a focus on anti-competitive practices, irregular pricing and the ways in which the apps handle the data of users. The Chinese internet regulator will also be investigating Full Truck Alliance Co. and Kanzhun Ltd., and both of these firms are listed in the U.S.
All we know for now is that China is investigating a slew of tech companies and this will affect them in a major way. A proof of that would be Didi’s warning of how the removal of the app for new users might have an adverse effect on revenue. Analysts are saying that this crackdown by the regulators might discourage other Chinese tech companies from launching an overseas listing, writes Bloomberg. So, China is going after tech companies, and we have to wait and see what the investigations find about the firms’ business practices and how these companies will handle these regulatory actions.
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