Why China is investigating tech companies like Didi
HONG KONG – Chinese regulators cracked down on the country’s largest ridesharing app, Didi Global Inc., days after its shares began trading in New York City. Authorities asked Didi to stop the new registrations and ordered that his app be removed from Chinese app stores pending a cybersecurity review. The government has said it is acting to prevent security risks and protect the public interest. Didi is the latest company to come under scrutiny in a crackdown on some of China’s biggest tech giants.
WHAT IS DIDI?
Chinese company Didi Global Inc. is one of the largest ridesharing apps in the world. Three-quarters of its 493 million annual active users are in China. Didi, based in Beijing, is present in 14 other countries, including Brazil and Mexico.
Years ago, Didi and Uber competed in China. In 2016, after a two-year price war, Didi bought Uber’s operations in China.
Did raised $ 4.4 billion in an initial public offering on June 30 in New York. The company has a market capitalization of approximately $ 74.5 billion.
WHY DIDI IS IN TROUBLE
The Chinese cyberspace watchdog has said it suspects Didi of being involved in the illegal collection and use of personal data. He did not cite any specific violation.
The state-owned Global Times newspaper said in an editorial Monday that Didi had the “most detailed personal travel information” from users of any major tech company. He said the company could perform big data analysis on user habits and behavior, which poses a potential risk to individuals.
THE BROADER CONTEXT
It is not known if there are other reasons the Chinese government could focus on Didi. Officials have expressed growing concern about the use of user data by large tech companies.
The Chinese Cyberspace Administration announced Monday that it is also launching cybersecurity reviews of the Huochebang and Yunmanman truck logistics platforms, and the online recruiting platform Boss Zhipin. New user registrations have been suspended pending these reviews.
Full Truck Alliance, which operates the Huochebang and Yunmanman platforms, and Kanzhun Ltd., which runs Boss Zhipin, also recently listed shares in the United States.
A sweeping data security law enacted in June requires businesses and individuals to seek approval from relevant authorities to transfer all data stored in China to foreign entities, such as law enforcement. The law comes into force on September 1.
Violators can be fined 2–10 million yuan (approximately $ 310,000–1.5 million) and could have their business suspended.
WHAT REALLY HAPPENS?
The leaders of the Chinese Communist Party are uncomfortable with the growing influence of big tech companies. The main issues are monopoly practices and the processing of user data.
Until recently, tech companies operated in a regulatory gray area, with relative freedom to create their business models, require merchants and vendors to sign exclusive contracts with their platforms, and collect user data to better understand their business. clients.
After China introduced health monitoring and quarantine apps during the pandemic, it became clear that tech companies like e-commerce giant Alibaba and games company Tencent were in control of huge amounts of data, said said Shaun Rein, founder and managing director of China Market Research Group in Shanghai.
“I think it’s over the last year and a half that you can start to see how powerful these tech companies are,” Rein said.
Alibaba Group Holding was recently fined a record $ 2.8 billion for antitrust violations. Other large tech companies have been fined or investigated for suspected anti-competitive behavior and financial disclosure breaches.
“Two years ago Chinese consumers didn’t care, they thought the convenience of the apps outweighed the negative benefits,” Rein said. “But now the Chinese are very concerned about data privacy because Alibaba and Tencent have so much data – even more data than the government. ”
Rein believes that tighter oversight of the tech industry will make it more sustainable, with fairer competition that will benefit consumers.
WHAT IMPACT ON DIDI?
Didi said in a statement that the removal of its app “could have a negative impact on its income in China.”
He pledged to solve all problems, “to protect the privacy and security of user data, and to continue to provide secure and convenient services to his users.”
The app can no longer be downloaded in China, although those who have already downloaded and installed the app can still use it, Didi said.
Didi’s stock price fell 5.3% on Friday after the cybersecurity review was announced.
Copyright 2021 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.