The regulatory crackdown on China’s ride-hailing giant Didi Chuxing continues as state security and police officials were sent to the business on Friday as part of a cybersecurity probe. The investigation now includes seven central government departments.
The Cyberspace Administration of China (CAC) and the Ministry of State Security began the on-site cybersecurity inspection two weeks after the country’s main internet watchdog launched the review and blocked the app from registering new users.
Other departments involved in the investigation now included the Ministry of Public Security, the Ministry of Natural Resources, the Ministry of Transport, the State Taxation Office and the State Administration of Market Regulation (SAMR), according to a statement published on the CAC’s website.
The on-site probe comes after Didi’s record-setting initial public offering (IPO) at the start of this month and its subsequent fall from grace.
On 30 June, China’s largest ride-hailing platform raised $4.4bn on the New York Stock Exchange (NYSE). However, a mere three days after its debut, the CAC launched its probe, citing illegal collection of users’ personal data and cybersecurity concerns.
Chinese regulators have recently tightened rules on the collection, storage and handling of personal data gathered by the country’s tech companies. After Didi, the CAC also started a probe into truck-hailing business Full Truck Alliance and online job seeking platform Kanzhun. Both apps, as well as Didi, remain blocked from app stores in China and thus unable to register new users until further notice.
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Similarly, Chinese news aggregator Jinri Toutiao owned by TikTok’s parent company ByteDance has reportedly been blocking user and content creator registration since September, Reuters wrote, citing people familiar with the matter.
According to the report, content creators on social media pointed out that they could not register for new accounts on Toutiao.
The reason for the blockage is not clear as Toutiao’s app can still be downloaded and existing users can continue to use it.
Parent company ByteDance has touted the idea of listing in the US. However, the company decided to shelve the float in response to the prevailing regulatory uncertainty around US IPOs, the Wall Street Journal reported.
In March, after meeting with the CAC in which they asked the company to focus on addressing data-security risks and other issues, ByteDance’s founder Zhang Yiming thought it would be wiser to halt the listing.
The CAC’s advice falls within the larger trend of Chinese regulators become increasingly wary of cybersecurity threats amid rising geopolitical tensions. As part of the ongoing trade war with the US, Beijing is determined to keep its tech companies from listing overseas.
“What’s happening at base is that Beijing is moving to punish companies that have listed overseas, notably in the US, and have large foreign shareholders. It’s a move that could boomerang,” Michael Orme, GlobalData analyst and China specialist, tells Verdict.
The CAC recently released a draft proposal, which would require companies that hold personal data of over one million users to go through additional cybersecurity reviews before listing abroad. The document cites “national security” as a primary reason for the new law.
The move is arguably also an attempt to make listings in Hong Kong more appealing. China plans to exempt companies going public on the Hong Kong Stock Exchange from seeking approval from the country’s cybersecurity regulator, Bloomberg reports citing people familiar with the matter.
Removing this hurdle for businesses shows that the government is keen to see companies list in the Asian financial hub instead of in the US. The exemption was outlined by officials in recent meetings with bankers after a government statement last week announcing a new review process for foreign listings prompted questions over whether it would apply to Hong Kong.
The CAC will vet companies to ensure they comply with local laws, but only those headed to other countries such as the US will undergo a formal review, the report said.
All listings, including those in Hong Kong, will require a sign-off from the China Securities Regulatory Commission under the new framework. Bankers briefed by the CSRC came away with the impression that the approval process for Hong Kong would be less onerous than for the US.