China Stops Didi from Registering New Customers Two Days After IPO

China Stops Didi from Registering New Customers Two Days After IPO

China has ordered ride-hailing company, Didi, to stop registering new riders a few days after it went public in the US. Didi raised $4.4 billion from its initial public offering.

The order came after the Cyberspace Administration of China (CAC) launched an investigation into Didi’s use of data that they said it is “in order to prevent national data security risks, maintain national security and protect the public interest.” The company shares fell as much as 10%Friday morning.

Chinese internet regulators have reined in on cybersecurity guidelines violators recently, warning tech companies to collect, store and handle key data properly.

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But the move is also in line with China’s recent crackdown on its tech sector that has seen many big names in the industry hit by fines and targeted regulatory orders.

China’s fintech giant, Ant, was preparing the biggest IPO in history late last year when regulators ordered the postponement. The stunning development kicked off a new array of regulatory mechanism, designed to keep players and individuals in the Chinese tech industry in check. Didi is the latest victim of the new regulatory framework.

In 2021, China’s market regulators fined Didi multiple times for not reporting details of merger and acquisitions to government agencies. Sources told Reuters the company is also facing an antitrust investigation over whether Didi used anti-competitive behaviors to drive out smaller rivals.

While Didi has been caught and fined for misconducts, antimonopoly and abuse of market dominance were rarely the issues. That suggests that the order stopping Didi from registering new customers for “national interest” has more to do with the company’s IPO debut in the US.

In the past four years, the US, under former president Donald Trump, intensified efforts to curb the freedom with which Chinese companies operate in American soil. Trump announced series of executive orders targeting Chinese tech companies, led by Huawei. Others include TikTok and Wechat. The executive orders which aimed to stop the companies from doing business in the US were based on national security concerns.

Trump had alleged that most of the companies have ties with China’s military and would not hesitate to share private data of Americans in their possession upon request. Though the affected Chinese companies repeatedly denied involvement with the Chinese military, it didn’t change much. Huawei’s leadership in the global 5G deployment has been severely impacted by US sanctions, irking China, prompting it to formulate retaliatory policies aimed to counter future sanctions and protect its business entities abroad. And at the same time, China is working to see that its companies don’t give the US access to Chinese data.

The CAC did not give details on its probe, but its mention of cybersecurity suggests China is wary of how Didi manages private data of its citizens overseas, especially in the United States. Didi offers a wide range of services in China and over 15 international markets, gathering vast amounts of real-time mobility data everyday.

Adam Segal, a cybersecurity expert at the Council on Foreign Relations in New York, said without details, it’s difficult to know exactly what is going on, but “CAC has been looking at security of all large firms’ data as part of a crackdown on big tech”.

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