China Fines Didi World $1.2 Billion, Fueling Hopes of Unfreezing in Regulatory Crackdown

HONG KONG/BEIJING, July 21 (Reuters) – China’s cybersecurity watchdog fined Didi World Inc $1.2 billion on Thursday, concluding an investigation that compelled the non-public transportation chief to drag out of New York inside a 12 months. of its debut and made overseas traders cautious of China’s tech sector.

Didi ran afoul of the Our on-line world Administration of China (CAC) when it went forward with its US inventory itemizing regardless of being urged to attend whereas a cybersecurity overview of its knowledge practices was carried out, sources beforehand informed Reuters.

The CAC stated Didi had violated three main legal guidelines on cybersecurity, knowledge safety and safety of non-public info, a regime the nation revised and expanded final 12 months as a part of efforts to control its our on-line world and require firms to enhance their knowledge dealing with.

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The regulator additionally stated its investigation discovered that Didi had illegally collected tens of millions of items of person info over a seven-year interval starting in June 2015 and carried out knowledge processing actions that significantly affected nationwide safety.

It fined Didi 8.026 million yuan ($1.2 billion) and, in an uncommon transfer, stated founder and CEO Cheng Wei and chairman Jean Liu have been answerable for the violations and imposed penalties of 1 million yuan every. .

“Didi’s violations of legal guidelines and laws are severe… and have to be severely punished,” he stated.

Didi, backed by traders together with U.S. Uber Applied sciences Inc (UBER.N) and Japan’s SoftBank Group Corp (9984.T), stated in a press release on its Weibo account that it accepted the CAC’s resolution and would conduct a self-examination. and an intensive rectification.

The regulatory motion towards Didi was a part of a broader and unprecedented crackdown by authorities on antitrust and knowledge safety violations, amongst different points, focusing on a few of China’s best-known company names.

In current months, authorities have shifted their tone in direction of repression as they search to spice up an economic system hit by COVID-19 containment measures. The change has raised hope for companies and traders that the worst is over, although nervousness stays.

Chinese language tech shares rose after Didi’s announcement, with the Cling Seng Tech Index (.HSTECH) gaining greater than 1% in afternoon buying and selling, earlier than paring most of its beneficial properties and ending the day larger. 0.12%.

“The effective ought to mark the tip of Didi’s regulatory woes,” stated analyst Travis Lundy of Quiddity Advisors, which publishes on the analysis platform Smartkarma.

“If there have been extra, they might have waited till they have been understood and addressed to impose the effective,” he stated, including that the event ought to permit Didi to maneuver in direction of itemizing in Hong Kong.

Didi, which delisted in New York final month, had beforehand focused a Hong Kong itemizing in June. She suspended such plans indefinitely after failing to get approval from Chinese language regulators, Reuters reported. learn extra

A display shows enterprise info for ride-sharing big Didi World on the ground of the New York Inventory Trade (NYSE) in New York Metropolis, U.S., December 3, 2021. REUTERS/Brendan McDermid

APP RELAUNCH

Didi’s effective could be the most important regulatory penalty imposed on a Chinese language expertise firm since Alibaba Group Holding Ltd (9988.HK) and Meituan (3690.HK) have been fined $2.75 billion and $527 million respectively final 12 months. by the antitrust regulator.

Alibaba’s effective was equal to about 4% of its 2019 home gross sales, whereas Meituan’s was equal to three% of its 2020 home gross sales. By comparability, Didi’s effective could be equal to about 4.6% of the corporate’s $25.7 billion in income final 12 months.

Beneath China’s Private Info Safety Regulation, firms may be fined as much as 5% of the earlier 12 months’s turnover or 50 million yuan, whereas the utmost effective for people discovered answerable for violations is 1 million. of yuan.

The CAC introduced its investigation into Didi shortly after it debuted in New York on June 30, 2021. It additionally ordered app shops to take away 25 Didi-operated apps and informed the corporate to cease signing up new customers, alleging nationwide safety and public curiosity.

The regulator didn’t say in its assertion on Thursday whether or not it might permit apps to return to app shops or when it might permit new person registration to renew.

Didi has beforehand stated it might want to use to revive the apps, and three sources informed Reuters the corporate has up to date the apps to make sure they’re compliant as soon as a relaunch is allowed.

An organization supply stated managers known as conferences with Didi groups after the effective announcement, throughout which they have been informed there was nonetheless little readability on when apps could possibly be restored to app shops.

Didi didn’t instantly reply to a request for remark concerning the apps.

A Didi investor, who was not approved to talk to the media and subsequently declined to be recognized, stated the fines ought to wrap up the CAC’s investigation into Didi so the corporate can resume regular purposes and enterprise. .

The restrictions have hit Didi exhausting, undermining its dominance and permitting rival ride-sharing companies operated by automakers Geely (GEELY.UL) and SAIC Motor Corp Ltd (600104.SS) to achieve market share.

Didi’s shares soared within the New York preliminary public providing, giving the corporate an $80 billion valuation and marking the most important public itemizing of a Chinese language firm within the US.

($1 = 6.7588 yuan)

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Reporting by Brenda Goh, Julie Zhu, Yingzhi Yang; Scott Murdoch, Zhang Yan, Kane Wu, and Selena Li; Written by Sumeet Chatterjee; Edited by Muralikumar Anantharaman, Christopher Cushing and Nick Macfie

Our requirements: the Thomson Reuters Belief Ideas.

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