China Business and Finance Update
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When Chinese regulators announced an investigation into Didi Chuxing’s data security last month, the New York-listed ride-hailing group immediately lost a fifth of its market value.
Beijing-based Didi, the entire Chinese technology industry and Global investors Now prepare for unprecedented detection results.
Neither the company nor the China Cyberspace Administration of China, which led the investigation, said what would happen. But analysts believe that Beijing will use the Didi investigation to issue a warning that technology groups must prioritize domestic compliance over foreign investors.
“They are trying to make a point: Don’t do it. The last time they shined on Alibaba, it was a record fine,” said Kendra Schaefer, a technical analyst at Trivium, a Beijing consulting firm. $2.8 billion in antitrust fines In April, he attacked Jack Ma’s e-commerce group.
“Beijing’s main goal in terms of data is to make companies understand that data and cyber security compliance is critical to its continued development,” she said.
this Announce investigation July 2, a few days after Didi’s $4.4 billion initial public offering. Officials have up to 45 working days to conduct investigations.
Since then, Didi’s statement was limited to responding to media reports: upcoming senior management changes, third parties being introduced for data management, and company Maybe even privatized.
Didi described these reports as “untrue and unsubstantiated.”
Two people familiar with the matter told the Financial Times that despite these denials, investors in this online ride-hailing group are still highly concerned that it has been instructed to withdraw from its listing on the New York Stock Exchange.
Another person familiar with the investigation expects the Chinese government to take “Gold stocks“In Didi, this will achieve tighter state control in the future.
The person familiar with the matter said that this outcome became more likely after a think tank under the Chinese market regulator issued a working paper in April encouraging the purchase of gold stocks in groups that are vital to the public.
Didi refused to answer questions.
Even people closely related to Didi’s IPO are looking for answers.
In New York, lawyers filed a class action lawsuit on behalf of Didi’s investors, claiming that they were Misled by the company And its executives’ previous transactions with Chinese regulators.
The question of whether Didi accurately disclosed the pressure it faced from CAC also triggered a review of its listed underwriting banks, including Goldman Sachs and Morgan Stanley.
Didi and its bank received “full compliance” guarantees from their legal advisers in China. Shortly after the online ride-hailing group’s shares went public, an executive from one of the Wall Street banks said. Plummet last month.
For SoftBank, Didi’s largest shareholder 20.1% of shares, The investigation may be crucial to determining the future of Japanese group investment in China’s technology sector.
Sun Zhengyi, the founder of Softbank, once said that he would Cut investment In China’s start-ups, until the extent of Beijing’s regulatory crackdown becomes clear.
It is also hoped that the Didi investigation will provide clues as to how far and in-depth the regulatory changes will be made.
Schaefer said that although Beijing is often “quite lax” in details, “some government departments are eager to provide guidance to other companies so that they can take voluntary actions to correct themselves.”
Didi’s competitors Companies in other Chinese technology industries will pay close attention to whether the ride-hailing group will be allowed to resume normal operations of its applications, or whether Beijing needs major reforms.
At the beginning of last month, the company was instructed Remove its platform From the Chinese app store, and CAC warned before listing that the company’s Surveying and Mapping Technology May expose sensitive locations, such as military bases.
Others predict that Beijing will force Didi to reduce the commission it charges drivers based on the guidance of the Ministry of Transport.
The existence of at least seven state agencies in the Didi investigation has exacerbated the uncertainty in the final supervision of the technology industry by regulators.
In addition to CAC, officials from the Chinese spy agency, the Ministry of Natural Resources and the Ministry of Transportation, as well as tax and police officials, and competition monitoring agencies Landed at the company headquarters.
“For us, the biggest question mark is the tax bureau-it seems very irrelevant,” Schafer said. “Is this because they decided to include tax review, or will the tax department participate in future cyber security reviews?”
Didi’s investigation marks the first such cybersecurity review under China’s comprehensive reform of data governance, including strict new Data privacy law.
However, Sam Sachs, a senior researcher at the Paul Tsai China Center at Yale Law School, warned that the triggers and results of future investigations may still be “black boxes.”
She said that censorship is “a highly subjective tool. When the government needs to send information or claim control of the company, they can use it as they wish.” “That’s why it is so terrible.”
Additional report by Sherry Fei Ju in Beijing
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