Home Asia News Didi and other tech companies continue to face China’s regulatory wrath

Didi and other tech companies continue to face China’s regulatory wrath

Didi Chuxing App (Source: Didi Chuxing)

China has continued wielding the regulatory whip on its domestic tech companies, triggering concerns of the further impact on the market value of these tech conglomerates. Mobile transportation platform DiDi Chuxing has drawn the latest regulatory scrutiny, reviving fears about Beijing’s harsh intentions for its tech industry.

The Cyberspace Administration of China, the agency responsible for data security in the country, has asked Didi Global Inc.’s top executives to devise a plan to delist from the New York Stock Exchange, according to media reports. The proposals are said to include straight-up privatization or a share float in Hong Kong following the delisting from NYSE.

Behind the step lie concerns about leakage of sensitive data from DiDi. China’s largest ride-hailing app has 377 million annual active Chinese users and provides 25 million rides a day.

The tech behemoth has been under China’s regulatory radar since July, soon after the ride-hailing giant went ahead with its mega New York listing on June 30, without resolving outstanding cybersecurity issues with the Chinese authorities. Overall, 25 mobile apps operated by Didi were removed from Chinese app stores since then, over its collection and use of personal data.

Meanwhile, the company has been cooperating actively and also set aside $1.6 billion for a potential fine to address the data security concerns.

Besides the probe into data security, the delisting request also comes on the backdrop of the lengthy dispute between Washington and Beijing about auditing standards of listed Chinese firms.

Continued crackdowns for China’s tech companies

China began a crackdown on the tech conglomerates last year, citing national security concerns, data security breaches as well as violations of antitrust regulations. Adding to the mounting list of regulations bundled under Xi Jinping’s ‘common prosperity’ drive, China could now impose a “data tax” on platform developers, including big internet companies.

“Platforms that possess large amounts of personal information should return 20% to 30% of revenue generated by transactions to the producers of that data,” Nikkei Asia quoted Chinese politician Chongqing Mayor Huang Qifan.

Meanwhile, in a recent antitrust investigation, Chinese regulators imposed fines worth $3.4 bn cumulatively on the tech companies like Alibaba Group Holding, Tencent Holdings and Baidu among others, for ‘failing to declare the illegal implementation of the operating concentration.’

According to the State Administration for Market Regulation, such companies must pay $78,000 for each of the 43 antitrust violations, that were not reported by these tech stalwarts in the last eight years.

Only last month, Chinese food-delivery leader Meituan was fined $533 m for violating anti-monopoly regulations. Earlier this year, the multinational technology giant Alibaba was slapped with a $2.8 bn fine for abusing its market dominance.

Furthermore, Tencent Holdings was suspended from releasing new mobile applications and updating existing ones without regulators’ approval. Amid regulatory woes, the gaming company has reported its slowest profit growth in two years.

Billionaire Jack Ma’s empire Alibaba also recently posted disappointing earnings – a big fall of 81% fall in net income to $833.5 m in the second quarter 2021 compared to the same period of last year. Other tech companies like Meituan, Kuaishou, Baidu are expected to post weaker earnings in the quarter ended September 30.