As a Chinese tech company you can grow fast for a long time, without the Communist Party of China getting in your way. Until the mood of the authorities changes: then it can suddenly become annoying. Didi Chuxing, the company behind a wildly popular Chinese taxi app, experienced this.
Last Wednesday, Didi successfully went public on the stock exchange in New York, raised 4.4 billion dollars (3.71 billion euros) and was valued at 76 billion dollars. Friday suddenly came message from the Chinese digital regulator CAC: Didi is under investigation because of risks to ‘national data security’ and to protect ‘national security’ and ‘public interest’. The investigation was concluded on Sunday. The CAC concluded that Didi illegally collected user data and banned the provision of the Didi app to new users. Didi can continue to use already installed apps.
The price of Didi in New York plunged by more than 5 percent on Monday, but was still above the opening price of $ 14 last week at around $ 15.50 in the afternoon.
Didi is the Chinese version of Uber. It provided nearly 90 percent of taxi app rides in China in the fourth quarter of 2020. according to data from Bloomberg news agency. The company is also active in fifteen other countries and is expanding its activities, including grocery delivery. Five years ago, Didi pushed the American Uber out of the Chinese market, with Uber acquiring a 12 percent stake in the Chinese company.
Other tech companies
It is not clear what exactly is behind the action by the Chinese authorities. What is happening with Didi now fits into a pattern. Chinese authorities are increasingly focusing on the power of technology giants. AliBaba and his financial arm Ant have been under fire for nearly a year. AliBaba founder Jack Ma was untraceable for some time last year. And Ant’s planned IPO in Hong Kong and Shanghai was canceled in November last year under pressure from the authorities.
What happened to Didi and Ant shows that “IPOs can be very dangerous in China,” said Martin Chorzempa, a researcher at the Peterson Institute, a Washington think tank, according to news agencies. IPOs draw attention to the scale of business activities and therefore arouse special interest from regulators. On Monday, the CAC announced that the regulator is also investigating two other tech companies that have recently gone public in the US: Full Truck Alliance, a type of Uber for trucking, and Zhipin.com, a job posting app.
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Data seems to play a special role in the deliberations of the authorities. During the corona pandemic, China introduced health and quarantine apps and it became clear how much personal data is already in the hands of tech companies, said Shaun Rein, chief of consultancy China Market Research Group in Shanghai, according to the AP news agency.
Data is central
The Chinese government seems to want to keep data collection for itself. The nationalist, partly communist-funded tabloid Global Times wrote in a comment“No internet giant is allowed to become a super database that holds more personal data of the Chinese people than the government, let alone use the data at will.” This is especially true, the paper writes, for Chinese tech companies with links to foreign countries: companies that go public in the US or whose largest shareholders are foreign. The largest shareholder in Didi is Japanese tech investor SoftBank, the second largest is Uber. Incidentally, according to Bloomberg, Chinese CEO Cheng Wei and Chief Executive Officer Jean Liu have more than half of the votes in company shareholders’ meetings because of Didi’s ownership structure.
The Financial Times searched out that 34 Chinese companies went public on Wall Street in the first half of this year, raising together $12.4 billion. More than two thirds of these newcomers to the stock market now have a price that is below the introductory price. Low: RLX Technology, China’s largest e-cigarette products. That has plummeted by 71 percent since its IPO.