On Sunday, Chinese regulators ordered Didi, a ride-hailing service, to be removed from app stores across the country, claiming the business had engaged in the illegal gathering and use of personal data. This development comes on the heels of Didi’s successful NYSE debut.
After ordering the expulsion of Didi from Chinese app stores, which sent tech stocks falling, Beijing has widened its crackdown on tech platforms, targeting more US-listed companies.
On Monday, China’s Cyberspace Administration revealed that it was looking into Boss Zhipin, an online employment firm, as well as Chinese truck-hailing apps, Yunmanman and Huochebang, which combined in 2017 to form Full Truck Alliance. While the services are under investigation, they are not permitted to accept new users.
Asian markets were shaken by the regulatory onslaught. SoftBank, whose Vision Fund is a major Didi investment, plummeted 5.4% in Hong Kong, while internet companies, Alibaba and Tencent sank 2.9% and 3.7% respectively.
Didi’s stock dropped 5.3% on Friday, two days after the business went public on the New York Stock Exchange, raising $4.4 billion in the largest Chinese corporate listing in the US since Alibaba in 2014. At the time of writing this article Didi share was down by 5.30% with price at $15.53.
The crackdown on Didi and other tech businesses by China’s cybersecurity authority signified a fresh offensive against the country’s tech companies, utilizing the cybersecurity legislation. Companies like Ant Group and Alibaba, two foundations of billionaire Jack Ma’s internet empire, as well as eCommerce group, Meituan, have previously been punished by China’s financial and competition watchdogs.
China has had some data control since the 2017 Cybersecurity Law, according to CNBC. However, the Data Security Law, which sets the standards for how businesses acquire, keep, process, and transfer data, was passed in June. It takes effect in September. The Personal Information Protection Law is a separate piece of legislation in the works. It will allow users more control over their data if it is passed.
What this means
After discovering that the ride-hailing company had illegally acquired customers’ personal data, China’s cyberspace regulator ordered smartphone app retailers to shut down Didi Global’s app in China.
Due to the importance of data regulation to the technology industry, which is a vital engine of economic growth, authorities are focusing their efforts on it. China approved a key data security law in June and is working on additional data privacy regulations in order to achieve this aim.
Didi crackdown may impact major stakeholders such as Uber, which owns 12.8% of DiDi’s stock after acquiring Uber’s China operations. SoftBank’s Vision Fund owns 21.5% of the company. In 2016, Apple also made a $1 billion investment in DiDi.
