Billions of dollars wiped off stock value after China orders stores to remove app days after its US listing
Last modified on Tue 6 Jul 2021 13.17 EDT
Billions of dollars were wiped off the value of the Chinese ride-hailing app Didi on Tuesday, after a crackdown on the country’s tech sector by the Chinese authorities prompted a sell-off.
Shares in the company were down about 22% at $12, days after it listed on the New York Stock Exchange, reducing its market value by about $17bn.
It was the first opportunity for investors to trade shares in the company since the Cyberspace Administration of China (CAC) ordered on Sunday that Didi be removed from mobile app stores in China. The CAC said it was investigating Didi’s handling of customer data, to protect “national security and the public interest”. Wall Street was closed on Monday for Independence Day.
Beijing on Tuesday also said it would tighten the rules for companies seeking to be listed overseas, in a move that analysts said would further restrain the overseas ambitions of Chinese companies.
The government said in new guidelines that it needed to strengthen “cross-border regulatory cooperation” and amend laws and regulations “on data security, cross-border data flow and other confidential information management”.
The sell-off was not limited to Didi; shares in other Chinese parent companies listed in the US were also down sharply on Tuesday, including the truck-hailing firm Full Truck Alliance – also under investigation by the CAC – and recruitment platform Kanzhun.
It is the latest in a series of regulatory crackdowns by Beijing on tech firms in China, including the e-commerce company Alibaba, which is listed in the US and Hong Kong.
Analysts said Beijing’s recent actions against overseas-listed companies signalled a significant move in a sweeping crackdown on its booming and once-freewheeling online “platform economy”.
“Crackdown on Didi opens a new front in China’s tech assertiveness – this is now a question of sovereignty,” investment research provider TS Lombard’s China economist Rory Green wrote in a note.
“The battle for data sovereignty is beginning and China is already fully mobilised. It is increasingly clear that governments around the world have recognised the importance of data and the need to regulate the utility like private firms that control its production and flow.”
Didi’s trouble came two days after its mega IPO in the US last week. On Friday, the authorities announced an investigation into the company, which has more than 377 million active users and 13 million drivers across China.
Then on Sunday, China’s cyberspace regulator ordered smartphone app stores to pull the Didi app after it alleged the company had “illegally collected users’ personal data”. Around the same time, the regulator also ordered online recruitment platform Boss Zhipin and two truck-hailing services run by Full Truck Alliance to stop registering new users.
The state-owned Global Times said the move showed Beijing’s “resolve to enhance data security”.
“The regulatory actions against Didi, coming as China stepped up its crackdown on illegal activities on online platforms including anti-monopoly and privacy law violations, showed Chinese regulators’ determination to strengthen protection for personal information and data,” the popular tabloid said, citing local analysts.
In response to the regulator’s moves, Didi said it expected that the app takedown “may have an adverse impact on its revenue in China”. Didi also pledged it would “earnestly rectify and reform existing problems, and … conscientiously ensure the personal information security of the numerous users”.
“We sincerely thank the responsible departments for guiding Didi to inspect the risks,” the company said on Chinese social media on Sunday night.
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