The travel agent will now withdraw from Wall Street.
(Photo: Reuters)
Beijing The Chinese travel agency Didi has to pay the equivalent of 1.2 billion US dollars in fines. This was announced by the cyber security authority CAC (Cyberspace Administration of China) on Thursday. This ends the year-long investigation into the taxi service, which was initiated shortly after its US IPO.
Supervisors found Didi guilty of “seriously compromising national security” by failing to protect data. In addition, the company failed to comply with the authorities’ demands and evaded supervision, it said in a statement. In addition to the billions in fines for the group, Didi CEO Cheng Wei and President Jean Liu also have to pay the equivalent of $150,000 each.
The fine was less than the highest fine ever imposed on a tech company, which was the equivalent of around $2.8 billion. The e-commerce group Alibaba had to pay this sum in 2021. Some observers take this as a sign that the tough course the regulators have taken against the tech industry since 2021 could be softening. Recently, some investors have been hoping that the recent economic slump as a result of the lockdowns will make tech regulators more lenient.
At a Politburo meeting in April, Chinese leader Xi Jinping announced that oversight of the tech sector would be more standardized to support the “healthy development” of tech companies. The Politburo is the supreme body of the ruling Communist Party in China.
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The Chinese People’s Political Consultative Conference advocated a stronger digital economy at a meeting in May, which was also attended by leaders from the technology sector. The conference is China’s top political advisory body.
“Nobody can be sure that the worst is behind us”
However, experts warn that an end to the investigation against Didi will result in a more relaxed tech regulation. Willer Chen, an analyst at Forsyth Barr Asia, told Bloomberg news agency: The conclusion of the investigation into Didi has shown the companies where “the red line is”.
Since the Chinese investigations began in July last year, the app has not been found in digital software shops in China.
(Photo: Reuters)
It is encouraging news for China’s tech industry, “but no one can be sure that the worst is behind us,” Chen said. In addition, the regulatory interventions have significantly slowed the revenue growth and profit margins of the tech platforms.
Experts assume that the state leadership made an example of the tech companies with the record fine against Didi and the IPO ban for the Alibaba subsidiary Ant. In recent years, the corporations have grown into huge conglomerates with practically no regulation. Due to their size and data power, they not only endanger competition, but have also become too powerful in the eyes of the ruling Communist Party.
Didi went public in New York at the end of June last year, raising $4.4 billion. But only a few days after the IPO, the CAC launched investigations into the company. The stock then plummeted. The company has since lost $70 billion in market value.
>> Read here: Stagnating sales, frustration among bosses: The side effects of China’s tech regulation
The state government accused the company of putting sensitive data from China in the wrong hands as a result of the foreign IPO. Didi is said to have ignored the warnings of the supervisors in the run-up to the IPO.
The authorities prohibited the company from acquiring new customers in the important home market. The provider’s app has been removed from the Chinese app stores and is no longer downloadable.
At the end of May, investors had decided to withdraw Didi from Wall Street in order to placate the supervisors. The company is currently traded on the Pink Sheets market, which is reserved for riskier securities. The group aims to be listed on the Hong Kong Stock Exchange HKex. So far, however, the Chinese supervisors have not approved this plan.
More: Sensitive data hacked – How China’s surveillance state is growing