China’s Cyberspace Administration fines Didi Global $1.2bn
The CAC says its probe found that Didi illegally collected millions of pieces of user data over a seven-year period starting in June 2015
21 July 2022 - 13:46
by Julie Zhu, Yingzhi Yang and Kane Wu
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A screen displays trading information for ride-hailing giant Didi Global on the floor of the New York Stock Exchange in New York City, US, in this December 3 2021 file photo. Picture: REUTERS/BRENDAN MCDERMID
Hong Kong/Beijing — China’s cybersecurity regulator fined Didi Global $1.2bn on Thursday, concluding a probe that forced the ride-hailing leader to delist from New York within a year of its debut and made foreign investors wary about China’s tech sector.
Didi ran afoul of the Cyberspace Administration of China (CAC) when it pressed ahead with its US stock listing even though it was urged to wait while a cybersecurity review of its data practices was conducted, sources previously told Reuters.
The CAC said its investigation found Didi had illegally collected millions of pieces of user information over a seven-year period starting June 2015, and carried out data processing activities that seriously affected national security.
It fined Didi 8.026-billion yuan ($1.2bn) and, in an unusual move, said founder and CEO Cheng Wei and President Jean Liu were responsible for the violations, and imposed penalties of 1-million yuan each.
“Didi’s violations of laws and regulations are serious ... and should be severely punished,” it said.
Didi, backed by investors including US peer Uber and Japan’s SoftBank , in a statement on its Weibo account said it accepted the CAC's decision and would conduct comprehensive self-examination and rectification.
The regulatory action against Didi was part of a wider and unprecedented crackdown by authorities for violation of antitrust and data security rules, among other issues, targeting some of China's best-known corporate names.
Authorities have in recent months changed their tone towards the crackdown as they seek to boost an economy hurt by Covid-19 containment measures. The shift has raised hope for companies and investors that the worst is over, though jitters remain.
Chinese technology stocks rose after the Didi announcement, with the Hang Seng tech index rising more than 1% in afternoon trade.
“The fine should mark the end of Didi’s regulatory troubles,” said analyst Travis Lundy at Quiddity Advisors who publishes on research platform Smartkarma.
“If there were more, they'd have waited until those were understood and addressed to levy the fine,” he said, adding the development should allow Didi to move towards listing in Hong Kong.
Didi, which delisted from New York last month, previously aimed to list in Hong Kong by June. It put such plans on hold indefinitely after failing to win approval from Chinese regulators, Reuters has reported.
App relaunch
Didi’s fine would be the largest regulatory penalty imposed on a Chinese technology company since Alibaba and Meituan were fined $2.75bn and $527m respectively in 2021 by the antitrust regulator.
Alibaba's fine equated to about 4% of its 2019 domestic sales, while Meituan’s was equivalent to 3% of its 2020 domestic sales. In comparison, Didi’s fine would be equal to about 4.6% of the firm’s $25.7bn revenue in 2021.
The CAC announced its inquiry into Didi shortly after its New York debut on June 30 2021. It also ordered app stores to remove 25 apps operated by Didi and told the firm to stop registering new users, citing national security and the public interest.
The regulator did not say in its Thursday statement whether it would allow the apps to return to app stores or allow new user registration.
Didi previously said it would need to apply for the apps to be restored and three sources told Reuters that the company has updated the apps to ensure they were compliant once a relaunch was allowed.
Didi did not immediately respond to a request for comment on the apps.
A Didi investor, who was not authorised to speak with media and so declined to be identified, said the fines should conclude the CAC's investigation into Didi so the company should be allowed to resume its apps and normal businesses.
The restrictions have hit Didi badly, chipping away at its dominance and allowing rival ride-hailing services operated by automakers Geely and SAIC Motor to gain market share.
Didi stock soared in the New York initial public offering, giving the company a valuation of $80bn and marking the biggest US listing by a Chinese firm since 2014. By the time of delisting, the stock had lost over 80% in value.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
China’s Cyberspace Administration fines Didi Global $1.2bn
The CAC says its probe found that Didi illegally collected millions of pieces of user data over a seven-year period starting in June 2015
Hong Kong/Beijing — China’s cybersecurity regulator fined Didi Global $1.2bn on Thursday, concluding a probe that forced the ride-hailing leader to delist from New York within a year of its debut and made foreign investors wary about China’s tech sector.
Didi ran afoul of the Cyberspace Administration of China (CAC) when it pressed ahead with its US stock listing even though it was urged to wait while a cybersecurity review of its data practices was conducted, sources previously told Reuters.
The CAC said its investigation found Didi had illegally collected millions of pieces of user information over a seven-year period starting June 2015, and carried out data processing activities that seriously affected national security.
It fined Didi 8.026-billion yuan ($1.2bn) and, in an unusual move, said founder and CEO Cheng Wei and President Jean Liu were responsible for the violations, and imposed penalties of 1-million yuan each.
“Didi’s violations of laws and regulations are serious ... and should be severely punished,” it said.
Didi, backed by investors including US peer Uber and Japan’s SoftBank , in a statement on its Weibo account said it accepted the CAC's decision and would conduct comprehensive self-examination and rectification.
The regulatory action against Didi was part of a wider and unprecedented crackdown by authorities for violation of antitrust and data security rules, among other issues, targeting some of China's best-known corporate names.
Authorities have in recent months changed their tone towards the crackdown as they seek to boost an economy hurt by Covid-19 containment measures. The shift has raised hope for companies and investors that the worst is over, though jitters remain.
Chinese technology stocks rose after the Didi announcement, with the Hang Seng tech index rising more than 1% in afternoon trade.
“The fine should mark the end of Didi’s regulatory troubles,” said analyst Travis Lundy at Quiddity Advisors who publishes on research platform Smartkarma.
“If there were more, they'd have waited until those were understood and addressed to levy the fine,” he said, adding the development should allow Didi to move towards listing in Hong Kong.
Didi, which delisted from New York last month, previously aimed to list in Hong Kong by June. It put such plans on hold indefinitely after failing to win approval from Chinese regulators, Reuters has reported.
App relaunch
Didi’s fine would be the largest regulatory penalty imposed on a Chinese technology company since Alibaba and Meituan were fined $2.75bn and $527m respectively in 2021 by the antitrust regulator.
Alibaba's fine equated to about 4% of its 2019 domestic sales, while Meituan’s was equivalent to 3% of its 2020 domestic sales. In comparison, Didi’s fine would be equal to about 4.6% of the firm’s $25.7bn revenue in 2021.
The CAC announced its inquiry into Didi shortly after its New York debut on June 30 2021. It also ordered app stores to remove 25 apps operated by Didi and told the firm to stop registering new users, citing national security and the public interest.
The regulator did not say in its Thursday statement whether it would allow the apps to return to app stores or allow new user registration.
Didi previously said it would need to apply for the apps to be restored and three sources told Reuters that the company has updated the apps to ensure they were compliant once a relaunch was allowed.
Didi did not immediately respond to a request for comment on the apps.
A Didi investor, who was not authorised to speak with media and so declined to be identified, said the fines should conclude the CAC's investigation into Didi so the company should be allowed to resume its apps and normal businesses.
The restrictions have hit Didi badly, chipping away at its dominance and allowing rival ride-hailing services operated by automakers Geely and SAIC Motor to gain market share.
Didi stock soared in the New York initial public offering, giving the company a valuation of $80bn and marking the biggest US listing by a Chinese firm since 2014. By the time of delisting, the stock had lost over 80% in value.
Reuters
Didi shareholders vote for New York delisting
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