Technological crackdown in China: Didi plans to cede control of valuable data | Business and Economy News
Didi Global Inc. is considering relinquishing control of its most valuable data as part of efforts to resolve a Chinese regulatory investigation following its controversial U.S. IPO, people familiar with the matter have said.
The ridesharing giant has come up with a number of proposals to appease the powerful Internet industry watchdog, including handing over the management of its data to a private third party, the people said, asking not to be identified in speaking of internal deliberations. Regulators have indicated they prefer this third party to be state-controlled, one of the people said. It’s unclear how such an arrangement would impact Didi’s access to data, which is crucial to helping the company orchestrate 25 million trips per day between some 400 million runners and drivers.
It’s also unclear whether the proposals would appease the watchdog. Didi is fighting to ensure his survival after launching his American float over objections from officials fearing that a foreign listing will leak data and undermine national security. Regulators viewed his decision to go public despite China’s Cyberspace Administration refusal as a challenge to Beijing’s authority.
They are evaluating a range of potential penalties, including a fine, the suspension of certain operations or the introduction of a public investor, the people said. One proposal on the table was to bring in a state-owned enterprise with a larger stake than the current major shareholders SoftBank Group Corp. and Uber Technologies Inc., one of the people said. A forced privatization and delisting or withdrawal of US shares in Didi is also possible, although it is not clear how such an option would play out.
Didi shares were up 3.3% at 9:38 a.m. in New York. The ACC did not respond to a request for comment sent by fax, and representatives for Didi did not respond to messages and calls seeking comment.
Deliberations are at a preliminary stage and the results will likely only be finalized after weeks or even months of review, people said. But Beijing is likely to impose tougher penalties on Didi than on Alibaba Group Holding Ltd., which swallowed a record fine of $ 2.8 billion after a months-long antitrust investigation and agreed to take action to protect traders and customers, people said.
Didi could serve as a test case for a larger effort by the Chinese government to regain control of the data that tech giants claim daily from hundreds of millions of users, a source he considers vital to the economy and social stability. The Chinese government has offered to form a joint venture with internet companies to oversee this information, a project led by the People’s Bank of China, Bloomberg News reported.
Didi’s IPO on June 30 was the trigger for yet another assault on internet giants who at one point wiped out more than $ 1 trillion in Chinese stock market value. The ensuing crackdown on sectors ranging from private online education to ridesharing and social media scared off investors, prompted the Securities and Exchange Commission to take a closer look at businesses nationwide, and virtually halted a $ 40 billion annual lucrative train from US floats to Chinese companies.
China’s campaign to curb its giant internet industry enters its 10th month, a roller coaster ride that prompts nervous investors to ponder the long-term ramifications of a crackdown on companies from Jack Ma’s Ant Group Co. and Alibaba to food delivery giant Meituan.
Xi Jinping’s government is trying to strike a delicate balance between harnessing the power of China’s tech giants without inflicting serious damage on a critical sector that has supported economic growth. But last month’s actions demonstrated Beijing’s determination to attack private companies to tackle social inequalities, take control of data and subdue powerful interests. While the initial campaign focused on how the internet giants abused their so-called monopoly power, the latest wave of action involved the ACC as well as the Council of State, the most important government body. high from China.
Didi’s enrollment in the United States came just as Xi was looking for ways to control the vast amounts of data held by tech giants, in part to ensure the Communist Party spreads wealth beyond it. of a small circle of billionaires. Regulators are realizing the threat posed by private companies. In 2017, the government passed laws forcing foreign companies like Apple Inc. or Amazon.com Inc. to store Chinese data in the country, while forcing them to secure local partners to manage this treasure trove of information through local data centers. Didi may be considering a similar model, the people said.
It is not yet clear what lies ahead for Didi, who has lost a third of his market value since raising $ 4.4 billion via the second US IPO of a Chinese company. The debut – which followed years of run-ins with regulators after two murders in his network sparked a public backlash – turned co-founder Cheng Wei into a billionaire and rewarded longtime backers SoftBank, Tiger Global. Management and Temasek Holdings Pte.
His fate could be in the hands of the ACC, which rushed just days after the IPO to announce a cybersecurity review of the company’s data practices and then banned Didi’s app from the public. nationwide app stores.
Chinese regulators have widely supported the idea of an IPO, but have expressed concerns about Didi’s data security practices since at least April, people familiar with the matter said. In a worrying example, Didi had leaked statistics on taxi rides taken by government officials, one of the people said, although it is not clear if this specific issue has ever been raised with the company. .
(Updates with Didi actions in the fifth paragraph)
–With help from April Ma.