A Chinese mobile-phone user dials the taxi-hailing car-service app DiDi Chuxing. Photo: Xinhua
A Chinese mobile-phone user dials the taxi-hailing car-service app DiDi Chuxing. Photo: Xinhua

Didi Global, China’s ride-hailing giant, is expected to have its normal operations and listing plan back on track soon after it was fined 8 billion yuan (US$1.18 billion) by the Chinese cybersecurity regulator for breaking data security laws.

After a year-long investigation, the Cyberspace Administration of China (CAC) said in a statement that Didi had illegally and excessively collected the personal information of customers and drivers and analyzed the data without their consent.

Didi’s American Depository Receipts (ADRs) jumped 8.88% to $3.80 on Thursday.

Broader tech clampdown

Since Ant Group’s planned $37 billion IPO in the United States was scrapped in November 2020, Beijing has increasingly tightened its regulations on Internet companies, causing their share prices to drop by 50-70% from their peak.

The logo of Ant Group in Hangzhou Photo: AFP

Some commentators said the closure of Didi’s case was further evidence to prove that the broader clampdown had come to an end.

Indeed, it was a good week for tech stocks. Shares of Tencent grew 2.1% to close at HK$331.8 ($42.3) on Friday. Alibaba’s shares fell 0.1% to HK$102.1 while Meituan increased 7% to HK$191.7 for the same period. Hang Seng Index, Hong Kong’s stock market benchmark, rose 1.5% this week. 

Didi’s brief rise and fall

Analysts said the worst time for Didi could have passed but it might take some time before the company’s apps would be available on app platforms in China again or its previously-proposed listing plan in Hong Kong would be resumed.

The company had flamed out rapidly and spectacularly.

On June 30 last year, Didi’s shares debuted on the New York Stock Exchange (NYSE) at an offering price of US$14 each. A few days later, the CAC said in a statement that it had received complaints that Didi’s mobile app had illegally and irregularly collected personal data.

It said the company’s 26 mobile apps had to be withdrawn from app stores in China immediately in accordance with the country’s Cybersecurity Law.

Trying to cut NYSE ties

Last December, Didi said it would delist from the NYSE and seek to relist in Hong Kong. However, media reports said on March 11 that Didi hadn’t complied with data-security requirements necessary to proceed with a share sale in Hong Kong. On the same day, Didi’s US-listed shares plunged 44% to US$1.89, or down 87% from its offering price in June 2021.

On May 11, Didi told the US Securities and Exchange Commission that if it did not delist from the NYSE, it would not be able to complete the cybersecurity review and rectification, which would have a material adverse impact on its ability to conduct normal operations, restore its businesses and serve the best interests of its shareholders.

It also said it had to complete the cybersecurity review in mainland China if it planned to go public in Hong Kong.

On May 23, the company said it had notified the NYSE of its decision to delist its US-listed shares. On the same day, the shares fell to a historic low of US$1.44, or down 90% from its offering price. On June 10, the shares were delisted but trading of the company’s ADRs started in the US over-the-counter market.

Chinese government’s case

According to the CAC’s announcement released on Thursday, a total of 16 pieces of evidence proved that Didi had abused the personal information of its customers and drivers.

Didi Logo. Photo: Wikimedia Commons

The CAC said Didi illegally collected 304 million pieces of information describing mobile app users’ places of work, 153 million pieces of drivers’ information and 107 million pieces of passenger facial recognition information. It also accused Didi of analyzing 53.976 billion pieces of information about travelers’ intentions and 1.538 billion pieces of information about travelers’ homes without informing passengers.

The CAC said it decided to fine Didi a total of 8 billion yuan in accordance with the Cybersecurity Law, Data Security Law, Personal Information Protection Law and Administrative Punishment Law. It said the company’s chairman and chief executive Cheng Wei and president Liu Qing were fined one million yuan each.

Didi said in a post on Weibo that it would strictly follow the CAC’s requirements to complete its cybersecurity review and rectification, increase the protection of personal information and fulfill its social responsibility.

Last year, Didi saw its total revenue grow 22.6% to 173.8 billion yuan from 2020. It recorded a net loss of 50 billion yuan in 2021, compared with a net loss of 10.7 billion yuan a year earlier. The latest fine of 8 billion yuan is equivalent to 4.6% of Didi’s 2021 revenue.

Analysts’ views

Steve Chow, senior vice president at the research team of Agricultural Bank of China International, said the issuance of the fine showed that Didi had passed its difficult time.

Chow said whether Didi’s business could return to normal would depend on when the company’s 26 apps would be available on app stores again. He said it would be easier for Didi’s shares to go public again if the company’s financial performance could show a significant improvement.

Zheng Yufei, an analyst at Guosen Securities (Hong Kong) Financial Holdings, said it would take some time for Didi to be able to resume its Hong Kong listing plan as its operation had been seriously disrupted by China’s tightening measures during the past year.

Zheng said the company lost market share to its rivals as it could not be approached by new customers after its apps were taken down from app stores. He said if Didi rushed to go public in Hong Kong now, it might not be able to get a high valuation.

Everbright Securities said in a research report that the closure of Didi’s probe meant that the ride-hailing company would soon be able to resume its Hong Kong IPO plan. It said the case showed that China’s clampdown on the Internet sector had entered a final stage, pending the end of the investigations of Alibaba’s Ant Group. It said China’s regulations on the technology sector would then become more predictable and transparent.

Li Daokui, a former advisor to the PBoC, said on June 3 that the scrapping of Ant’s IPO plan in November 2020 was a political decision, as top Chinese leaders were shocked by the huge list of the company’s shareholders, which even involved some party secretary members on a city level. He believes that the curbs imposed on the technology sector has basically ended.

Read: Ant IPO revival may signal end of tech clampdown

Follow Jeff Pao on Twitter at @jeffpao3