The Cyberspace Administration of China (CAC) on July 4 ordered app stores to remove China's most widely used ride-hailing app of Didi Chuxing, which it accused of "serious violations of law and regulation" in the collection and use of personal information. The move came only two days after the CAC put Didi under review and four days after it launched a large IPO on the New York Stock Exchange (NYSE). Analysts say it shows that Chinese regulators are determined to crack down on illegal activities by online platforms and enhance the protection of data security, according to the Global Times. The CAC further announced that as long as Didi is under review, the registration of new users would be suspended “to prevent the expansion of risks”. Didi replied it would strictly comply with the requirements and make improvements to secure its services.
As the Didi app is being removed from app stores, new users cannot register, but users who have already downloaded the app can still use it. On June 30 Didi raised USD4.4 billion in its IPO on the New York Stock Exchange (NYSE). Its shares ended up 1% on their first trading day before soaring nearly 16% on July 1. But after the cybersecurity review announcement, shares plunged as much as nearly 11% before finishing down 5.3% on July 2. Investors in Didi's U.S. shares were apparently caught off guard by the review, and the company might be the target of a class action lawsuit. Hao Junbo, Chief Lawyer at the HAO Law Firm in Beijing, told the Global Times that some of Didi's investors have reached out to his law firm and are considering participating in a class action suit to seek compensation.
Dong Shaopeng, Senior Research Fellow at the Chongyang Institute for Financial Studies at Renmin University of China, called for delisting Didi's newly floated shares as the company manages large amounts of data on the national transport infrastructure, and flows of people and vehicles, that involve national security, according to Dong. Didi's global annual active users for the 12 months to March 31 stood at 493 million, according to the company, the Global Times reports.
On July 5, the Cyberspace Administration launched reviews of three other technology companies: the two newly-listed truck-hailing service providers Yunmanman and Houchebang, and online recruiting platform Boss Zhipin. The CAC listed as reasons for the review the prevention of data security risks and the protection of national security. Yunmanman and Houchebang under Full Truck Alliance raised about USD1 billion in June, while Beijing-based Kanzhun, the company behind Boss Zhipin, raised USD912 million in its U.S. IPO last month. The CAC ordered the three companies to stop registering new users, the South China Morning Post adds. Cybersecurity regulators are also worried that Chinese companies listed in the U.S. may be forced by U.S. authorities to hand over data. Tech Analyst Liu Dingding said that Chinese firms that intend to list in the U.S. should think twice amid the tense environment, and seriously consider plans of a secondary listing in the home market. Didi denied rumors it handed over Chinese users' data to the U.S. after the U.S. listing.
