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In less than a week, China’s leading ride-hailing platform Didi has gone from being an investor darling with a mega-dollar startup on Wall Street to becoming the biggest new target in Beijing’s swift efforts to tame the country’s internet industry.
The latest front in the regulatory attack is privacy and cybersecurity. Chinese consumers have become increasingly privacy-conscious in recent years, and authorities have paid particular attention to protecting platforms like Didi’s that process sensitive information such as locations.
But Beijing’s moves against Didi — stop new user registrations, Then ordering from app stores in two days – both for their speed and the fact that they arrived just after the company’s IPO last week. They send a harsh message to Chinese businesses about the government’s authority over them, even if they operate globally and their stocks are located overseas. And they remind international investors in Chinese companies about the regulatory curves that can sometimes get in their way.
China’s internet regulator wasting no time announced on Monday morning He also said that, as with Didi, user registrations on three Chinese apps were suspended to allow authorities to conduct cybersecurity reviews. The two companies behind these apps recently listed shares in the United States.
Concerns about data protection are growing on both sides of the Pacific as relations between China and the United States have deteriorated in recent years. As the two powers competed for economic, military and technological advantages, each sought to ensure that their company’s digital information did not fall into the other’s hands, even if the business was across borders.
Beijing has not clarified which specific security and privacy issues, in the past or potentially, have prompted regulators to take action against Didi. But under chinese lawCybersecurity reviews are a national security concern, something officials failed to highlight when announcing their Didi review on Friday.
Angela Zhang, director of the Center for Chinese Law at the University of Hong Kong, said tensions with the US have motivated Chinese officials to pay more attention to Didi and its IPO in New York. Professor Zhang said that during this period of hostility, the sale of shares in the US inevitably raises concerns in Beijing about how well Didi’s China data is protected.
Another factor, he said: rising nationalism among Chinese internet users. Last weekend, after Chinese regulators halted new user registrations, Didi sought to dispel rumors that it had transferred data to the United States as a result of its listing.
“This in part pressures regulators to take action and also gives them legitimacy to act,” said Professor Zhang.
Apart from Didi, two companies whose platforms are currently under cybersecurity scrutiny are Full Truck Alliance, whose apps connect cargo customers and truck drivers, and Kanzhun, which operates a job search platform called Boss Zhipin.
rising stock market In the United States, Dingdong has attracted numerous other Chinese companies to go public in recent months, including grocery app and question-and-answer site Zhihu. But Didi is by far the most prominent.
With 377 million annual active users in China and serving in 16 other countries, the company has been celebrated as a local tech champion in China, especially after beating Uber in 2016 and acquiring its rival’s Chinese operations. A Didi representative declined to comment. Regulatory issues on Monday.
China’s restraint on the country’s internet giants began to gain momentum after the blocked IPO of fintech giant and Alibaba sister company Ant Group last year. Like Didi, Ant went ahead with a stock listing. history of regulatory concerns In China, but Ant was preparing to list in Shanghai and Hong Kong, not New York.
Since then, Didi has barely avoided the growing scrutiny of the internet industry as it prepares to go public. At the end of March, market regulators in the southern mega city of Guangzhou called him and nine other companies involved in the travel and delivery business to compete fairly and not use consumers’ personal information to charge higher prices.
A month later, Didi was one of nearly three dozen Chinese internet companies brought before regulators and ordered to comply with antimonopoly rules. Then, in May, transportation regulators met with Didi and other platforms to tell them to ensure fairness and transparency about pricing and drivers’ income.
Didi filed Preliminary IPO paperwork with the Securities and Exchange Commission on June 10. The remainder of the listing process was completed in lightning speed, and Didi’s shares began trading on the New York Stock Exchange on Wednesday.
Two days later, however, China’s internet regulator announced that Didi would not be allowed to register new users while authorities were investigating cybersecurity. The government’s rules for such reviews, which went into effect last year, are part of China’s framework for controlling security risks associated with the products and services used by major tech companies.
The next day, a Didi executive wrote on social platform Weibo that he had seen rumors that the company had to transfer user data to the United States due to going public in New York. The administrator said that Didi stores all Chinese data on servers in China, and the company reserves the right to sue anyone who says otherwise.
The message was reposted on Didi’s official Weibo account 16 minutes later, with the comment: “We hope everyone avoids spreading rumors and believing it!”
Sunday evening internet regulator turned it off another concise expression, this is ordering Didi’s app from mobile stores in China for unspecified issues with user data collection.
This isn’t the first time an app has been removed from mobile stores under pressure from the Chinese authorities, but in many such cases the apps were later reinstated.
In 2018, two popular video platforms, Kuaishou and Huoshan, disappeared from app stores after a government broadcaster accused them of crime. glorifying underage pregnancy. Huoshan is managed by TikTok’s parent company, ByteDance.
The next week, a ByteDance humor app, Neihan Duanzihas been taken completely offline for what the editors call vulgar content. Not only did the app disappear from the stores, it also stopped working for people who already had it on their phones.
On Monday, as Didi’s troubles were discussed on the Chinese internet, an article was distributed It was first broadcast by the state news media in 2015. The article used detailed data from Didi’s research wing to analyze the number of trips made from various government offices during a day and drew conclusions about the amount of overtime employees worked. those departments.
Comment added to the top of the article on Monday: “At the time, no one thought that Didi’s big data could cause a huge uproar today.”
Albee Zhang contributed to research.
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