Didi under cybersecurity probe following NYSE debut . . .
The Cyberspace Administration of China (CAC), the country’s top cybersecurity regulator, announced on July 2 that it had launched an investigation into one of China’s most popular ride-hailing apps, Didi Chuxing (also known as Didi), citing national security concerns. The probe came two days after Didi’s US$4.4-billion trading debut on the New York Stock Exchange on June 30, the biggest IPO in the U.S. so far this year. On July 4, the CAC ordered Didi’s 25 apps to be removed from China’s domestic app stores due to its violation of laws on user data collection and in its mapping functions. Following the news, Didi’s share price slid.
Diverging data regulations . . .
The Chinese State Council, the country’s top executive body, issued a statement on July 6 vowing to tighten its regulations on companies’ overseas listings, especially concerning cross-border transfers of ‘sensitive data.’ Many interpret the crackdown as another effort by Beijing to curb the domestic influence of emerging Chinese tech giants. Often overlooked is the more significant issue of conflicting data requirements in the U.S. and China. Washington passed legislation last December that requires U.S. regulators to review Chinese companies’ financial audits in order to be listed in the U.S. Meanwhile, China passed the Data Security Law in June, seeking to restrict unauthorized transfers of “important data to foreign judicial or law enforcement agencies.”
Uncertainty over future Chinese IPOs and data management . . .
The Didi case is the first time the CAC publicly invoked the cybersecurity review process. This has created uncertainty among global investors around whether future investments in Chinese companies – tech and beyond – could be impacted by the same process. As Beijing heightens its emphasis on tightening data management and localization for its info-rich apps, TikTok and WeChat have been similarly questioned by Washington on the excessive collection of U.S. consumer data. These recent developments hint at further decoupling of Sino-U.S. tech sectors, which could also be extended to the financial market.
- Financial Times: Didi caught as China and US battle over data
- Fortune: How Didi’s data debacle doomed China’s love affair with Wall Street
- South China Morning Post: Didi review seen as new milestone in Beijing’s cybersecurity regulations