Big Tech Crackdown in China... This Time Targeting Didi Chuxing Directly

Investigation into Unprecedented Security Threat Allegations
CAC Orders App Removal After Two Days

[Asia Economy Beijing=Special Correspondent Jo Young-shin] Didi Chuxing, China's largest ride-sharing company that made a dazzling debut on the New York Stock Exchange, is under investigation by Chinese regulatory authorities on charges of national security threats. China, which has been increasing regulatory pressure on big tech companies beyond government control, is now targeting Didi Chuxing.

According to the Wall Street Journal (WSJ) and Bloomberg on the 4th (local time), the Cyberspace Administration of China (CAC), the country's cyber supervision headquarters, ordered app markets to remove the Didi Chuxing app due to serious violations of personal information collection and usage regulations.

The CAC stated the investigation was based on the "National Security Law and Cybersecurity Law to prevent national data security risks, protect national security, and ensure public interest."

◆ Just two days after the investigation... ultra-fast action = This measure came just two days after the CAC announced the start of a security investigation into Didi Chuxing. Foreign media reported that the announcement of the investigation on the night of the 2nd followed by an app removal order two days later was an unprecedented speed in the history of the Chinese CAC.

It is also very unusual that the reason for the investigation into Didi Chuxing was cited as a "national security threat." Until now, the regulatory rationale for big tech companies was "antitrust violations." Because of this, some speculate that Didi Chuxing may face a more serious crisis than the e-commerce company Alibaba.

The issue that Chinese authorities are ostensibly raising is "data security risks." Didi Chuxing's business model collects real-time movement information of Chinese users and uses it for autonomous driving technology and traffic analysis.

In this regard, the Chinese state-run Global Times reported last year that the information managed by Didi Chuxing, which has 493 million users, is related to "national data sovereignty."

Dong Xiangfeng, a senior researcher at the Central Financial Research Institute of Renmin University, interpreted this as "a measure showing the Chinese authorities' determination to strengthen personal information and data protection and a timely step to build a crucial firewall for overall national security."

Western media interpret this move as retaliation for angering Chinese authorities. The WSJ analyzed, "The fact that this move by the authorities came right after Didi Chuxing's listing on the New York Stock Exchange (NYSE) shows that this investigation is not simply about data security but a targeted probe against Didi Chuxing."

◆ "The Communist Party's surveillance cannot be escaped anywhere" = Chinese authorities have felt threatened by the rapid growth of Chinese big tech companies escaping regulatory control and have increased regulatory pressure.

Meanwhile, Didi Chuxing, the largest IPO in the market with a market capitalization of $72.9 billion (as of the closing price on the 2nd) and a representative Chinese big tech company, chose New York over the Shanghai or Hong Kong stock exchanges, which has greatly displeased the Chinese government.

Bloomberg also emphasized that this news came not only right after Didi Chuxing's IPO but also shortly after the 100th anniversary of the founding of the Chinese Communist Party. Some interpret this as using Didi Chuxing as an example to tame the already oversized big tech companies.

Kendra Shaffer, head of technology policy at consulting firm Trivium China, said in a foreign media interview, "No matter where they IPO, Chinese big tech companies have made it clear that they are under the regulation of the Chinese Communist Party."

Experts predict that if the authorities' measures are prolonged, the business impact will be significant. During the investigation period, Didi Chuxing's expansion of new users will be halted.

Kendra Shaffer, head of technology policy at consulting firm Trivium China, pointed out, "Blocking Didi Chuxing's expansion of new users essentially means freezing the business and further hindering growth."

The stock price is already fluctuating due to regulatory risks. On the New York Stock Exchange, Didi Chuxing's stock price rose more than 15% on the second day after listing on the 1st but closed at $15.53 on the 2nd, down 5.3% after the investigation news was announced.

Starting as a taxi-hailing company in Beijing in 2012, Didi Chuxing rapidly grew after securing a $1 billion investment from Apple in 2015. In 2016, it merged with its competitor Uber China, securing the number one position in China's ride-sharing service industry with about 90% market share.

This content was produced with the assistance of AI translation services.