Already, the company that pulled Uber out of China has been pulled from the app store in the country and warned that it violated laws regarding data collection. Regulatory pressure has extended its first days as a publicly traded company in New York, with shares falling nearly 20% on Tuesday and retreating even more on Wednesday. All told, Diddy has lost about $29 billion in market value since its peak.
not only sister sugar The company is now entering Beijing’s line of fire. Two other businesses that have recently listed in New York are truck-hailing company Full Truck Alliance and job listing firm Kanjun. – It has been chosen as the target of the investigation by Chinese regulators “to prevent national data security risks”. Their shares have fallen 11% and 12%, respectively, this week.
The focus on Didi and other US-listed Chinese firms indicates that China’s technical action has entered a “new phase”, according to Alex Capri, a Singapore-based research fellow at the Hinrich Foundation.
“Data has become increasingly strategic, especially as more powerful AI, algorithms and machine learning, coupled with state-sponsored cyber activities, have become more pervasive,” he said, Stating that as computing progresses, the “huge treasure trove of data” large firms have will become ever-important to state actors.
This stage of China’s technical action is further defined by the relationship these companies have with the United States. While Beijing’s anti-monopoly investigations focused largely on operations within China’s borders, it’s hard to ignore how much the government’s latest actions have focused on firms that sought foreign investment.
“China’s concerns over personal data are heightened when the data is at risk of being controlled by US interests,” said Brock Silver, managing director of Hong Kong-based Kaiyuan Capital. The investigation was carried out shortly after raising capital in the United States.
A ‘Zero Tolerance’ Approach
The Didi investigation shows that regulators are now giving themselves even broader mandates when it comes to bridging the power of Big Tech.
On Sunday, the Cyberspace Administration – China’s top internet watchdog – accused Didi of “serious violations of laws and regulations” in the collection and use of personal information and banned Didi from the App Store.
Leader of the ruling Chinese Communist Party Then on Tuesday intensified the data protection campaign By pledging “zero tolerance” for illegal securities activity at home, and saying they would further control the ability of Chinese firms to list overseas.
The government said it would strictly regulate what kind of information those tech companies send and receive across country borders, and draft new rules about protecting sensitive data related to foreign listings.
Growing concern for data security
Concerns over data security in China – especially when the United States is involved – are not new, although they have been gaining traction in recent months.
The Chinese state media has also been emphasizing the need to focus on data security. The Global Times, a hawkish state-run tabloid, urged Beijing on Sunday not to allow Internet companies to “become rule makers for the collection and use of personal information.”
Data protection is also sparking debate on social media in China, with many users calling for stricter rules on companies like Didi to protect their personal data.
“As long as you’re using the apps, there’s almost no privacy,” the person said.
Risks of leaving American influence
Tensions between Washington and Beijing have also colored China’s latest round of technical action.
“President [Xi Jinping’s] The administration has been indicating for some time that it is moving towards a more self-reliant and less controlled control of major trading partners such as the United States.” Doug Guthrie, professor and director of the China Initiative at Arizona State University.
Heinrich Foundation’s Capri expects Beijing to “try and limit” [Didi’s] Negotiations with foreign players,” due to the company’s large share of US and Japanese investors.
“Since the scuffle with Alibaba last year, it’s clear that the Chinese government wants to send a very clear message to all tech companies operating in China,” Guthrie said. “If you want to work safely and securely in China today, you must be an ally of the Chinese government.”
Any company that is “going global too quickly,” he said, is being pulled back over the line.
Investors are already wary of companies still trying to tread the line between the United States and China. Chinese companies listed in both New York and Hong Kong outperformed the broader market in the Asian financial hub on Wednesday. Video-sharing website Bilibili fell more than 5%. Its US-listed stock fell 13% on Tuesday and Wednesday combined.
“It will be difficult for Chinese platforms to operate in the world’s liberal democratic markets on the one hand, while on the other hand China is trying to negotiate tighter domestic controls.” Capri said.
Caiyuan Capital’s Silver said global investors may also find it risky to own Chinese tech stocks — a fear that could jeopardize Chinese firms’ ability to access foreign capital.
Silver said, Didi and other companies were now allowed to “list and raise offshore capital under scrutiny, so that regulatory scrutiny can follow almost immediately. This is deeply disturbing, deeply unfair to investors, and raises serious questions about the integrity of the market.”
He said Beijing could reassure investors by banning the companies under investigation until the public markets. That way, regulatory surprises would be limited.
“But until that happens,” he said, “Allocations for multiple China IPOs could be dramatically reduced or eliminated.”