Just a year ago, Didi Global, China’s Uber, went public in New York, despite Beijing’s disapproval. In the days that followed, a cybersecurity investigation was opened against the company and its applications were suspended, sending the share price of a growing company plunging. According to information from wall street journal June 6, everything should be back to normal.
A year of investigation for mixed results
A sigh of relief must have sounded in the offices of Didi Global. Since July 2021, the company has been accused of having illegally collected the personal data of its users. China’s national security was invoked at the start of this case.
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The Chinese Cyberspace Administration (CAC) had sent investigators to the company’s offices to interview its executives, go through its files, emails and the internal messaging of employees.
According to the wall street journal the investigation should be closed within the week. Didi and two other companies who suffered the same fate were informed of this several days ago. The company’s applications will be able to return to dedicated stores and new users will be able to be recruited.
The investigation would not have revealed anything substantial, but Didi still risks receiving a rather severe fine. The other two organizations involved, the logistics platform Full Truck Alliance and the online recruitment company Kanzhun should be spared more. They will probably offer 1% ownership to the state and give a decision-making role to government officials.
This lengthy procedure has hurt the three companies extremely badly. FactSet reports that their cumulative market capitalization was $115 billion on July 1, 2021, it is now $25 billion.
It was by absolutely wanting to integrate the New York Stock Exchange that Didi had aroused the anger of Beijing. In October the CAC suggested the company leave the American East Coast to approach the Hong Kong stock exchange.
In April, Didi formalized this decision. In May the company’s shareholders voted to leave New York. Didi’s management then explained that it would go to the Hong Kong market when the CAC investigation was completed. This is now the case.
Didi’s journey, an allegory of two years of repression of Chinese tech
The Didi affair has become a symbol of China’s repression against its digital sector, just like Alibaba. The policeman of the American stock market, the Securities and Exchange Commission (SEC), calls for more complete audits of Chinese companies present in New York. Beijing, on the contrary, considered that its requests included data relevant to its national security. Didi found himself at the center of the standoff.
Since then, the situation has calmed down. The SEC and the Chinese authorities are negotiating an agreement. More broadly, the Chinese government has decided to pause the regulatory pressure that has been shaking its technology sector since the end of 2020.
In April, during a Politburo, President Xi Jinping declared his support for the “healthy development” of Chinese digital companies. A month later, the Chinese People’s Political Consultative Conference, the most important consultative body of the Middle Kingdom, went in the same direction in the presence of leaders of the Tech.
This relaxation, of which Didi is again the emblem, is linked to the economic situation in China. The government’s “zero covid” policy has shaken the country. Bad news for Xi Jinping who could run for a third term at the 20th Congress of the Chinese Communist Party in the fall of 2022. Didi and the other representatives of the sector should take advantage of this “break” to take a breather.