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Is Didi No More? Investigation Wipes it from App Stores

HeyExpat 2021-09-06

10 Minutes Read

• China’s internet regulator opens inquiry into Didi ride-hailing service. The tech firm is the latest online giant to be targeted by Chinese authorities. 
• The regulator’s announcement came two days after Didi Chuxing completed its IPO in New York. The company raised nearly $4.4bn, making it the largest IPO for a Chinese company in the first half of this year. On Friday, Didi Global’s stock price fell more 7% in morning trading.
• The app will keep working for current users, only will Didi not accept registrations of new users while the review is under way.

The announcement on Cyberspace Administration of China's website

Source: Cac.gov.cn



 Investigation launched after Didi's IPO in New York 


China’s internet regulator has launched an investigation into one of the country’s biggest ride-hailing services, Didi, two days after the company’s massive initial public offering (IPO) in New York. Didi's debut on Wednesday was the biggest U.S. listing by a Chinese company since Alibaba Group Holding Ltd in 2014. Didi had aimed to raise up to $10 billion through its IPO to value the company at $100 billion. However, investors were critical of the valuation target during meetings ahead of the deal's launch which pushed its size down.


Didi Global's (DIDI.N) shares fell more than 10% in New York on Friday after China's cyberspace agency said it had launched an investigation into the Chinese ride-hailing giant to protect national security and the public interest.


The Cyberspace Administration of China (CAC) said on its website that Didi was not allowed to register new users during its investigation, which was announced just two days after Didi began trading on the New York Stock Exchange. 


Beijing-based Didi said in a statement to Reuters that it planned to conduct a comprehensive examination of cybersecurity risks and would cooperate fully with the relevant government authority.


In a filing, it said that apart from the suspension of new user registrations in China, it was operating normally. Chinese internet regulators have tightened rules for the country's tech giants in recent years, asking companies to collect, store and handle key data properly.




 No details about the investigation 


The cyberspace agency did not offer details about its investigation into Didi, but said the investigation was also to prevent data security-related risks, citing China's national security law and cybersecurity law.


Didi, which offers a wide range of services in China and over 15 international markets, gathers vast amounts of real-time mobility data everyday. It uses some of the data for autonomous driving technologies and traffic analysis. 


Didi laid out related regulations in China in its IPO prospectus and said "we follow strict procedures in collecting, transmitting, storing and using user data pursuant to our data security and privacy policies." Two investors, however, told Reuters that company executives did not discuss possible cybersecurity regulation with investors at the call they joined for Didi's IPO roadshow.


"Didi does seem to be attracting a lot of regulatory pressure. The near-term impact depends a lot on how long a review lasts but Didi has a large enough base that we aren't going to change our forecasts yet," Redex Research analyst Kirk Boodry, who publishes on Smartkarma, told Reuters.


Didi, which raised $4.4 billion from its initial public offering (IPO), did not hold a celebration event for its market debut, an unusual move among Chinese companies. Founded by Will Cheng in 2012, has faced several regulatory probes in China over safety and its operation licence. The company is also facing an antitrust investigation, revealed by Reuters in June, looking at whether Didi used anti-competitive behaviours to drive out smaller rivals. It said at the time that it would not comment on "unsubstantiated speculation from unnamed source(s)". 


Didi is also backed by technology investment giants including SoftBank Group (9984.T), Alibaba, Tencent (0700.HK) and Uber (UBER.N

Some observers believe the move against Didi is part of a continuing crackdown by the Chinese authorities on what was once a loosely regulated technology sector. It follows government actions in recent months aimed at the online marketplace Alibaba, and social networks Tencent and Bytedance, the parent company of TikTok.

In response, Didi said it would fully cooperate with the relevant government authority during the review, adding: “We plan to conduct a comprehensive examination of cybersecurity risks, and continuously improve on our cybersecurity systems and technology capacities.”


Didi's statement on Weibo saying they will cooperate



 Warning shot 


In the past year, two of the country’s biggest tech giants, Alibaba and Tencent, were among major internet companies fined for failing to disclose deals in violation of the anti-monopoly law. And last month, shortly before its IPO, China’s market regulator launched an antitrust probe into Didi, according to Reuters.


“This is a warning shot to Didi and other Chinese tech companies aspiring to get listed on the New York stock market that they must comply with the regulators at all times,” said Feng Chucheng, a partner at the Beijing-based consultancy Plenum.ai. “We have long heard rumours that the regulator is against Didi’s IPO plan in the US. Such IPOs, in the regulator’s view, expose Chinese tech companies to foreign influence and make it harder for them to regulate.”


In recent months, Beijing has been intensifying its efforts to safeguard the nation’s cybersecurity. The country had nearly 1 billion internet users by the end of 2020. In April, a dozen government agencies issued Cybersecurity Review Measures, requiring critical information infrastructure operators to conduct network security reviews for technology products and services they procure that are relevant to national security or have the potential to be.


According to this new measure, a normal investigation into such a matter would take up to 30 business days to complete, with possible extensions of 15 additional business days for more complex cases.


Source: The Guardian, Reuters

https://www.theguardian.com/world/2021/jul/02/chinas-internet-regulator-opens-inquiry-into-didi-ride-hailing-service

https://www.reuters.com/technology/china-cyberspace-administration-launches-security-investigation-into-didi-2021-07-02/





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