China extends probe into US-listed tech firms after Didi blow

A logo of Chinese ride-hailing giant Didi Chuxing is seen at its headquarter in Beijing on July 2, 2021.

Beijing, China | Beijing on Monday widened its crackdown on its embattled technology sector Monday by announcing probes into two more US-listed Chinese companies, a day after banning ride-hailing giant Didi Chuxing from app stores in the wake of its huge New York initial public offering.

The country's major internet firms wield massive influence among its army of consumers, but have in recent months had their wings clipped in a regulatory crackdown that has scuppered listings and hit business as the government seeks to rein in their influence.

The latest targets are newly listed companies Full Truck Alliance -- a merger between truck-hailing platforms Yunmanman and Huochebang -- and Kanzhun, which owns online recruitment platform Boss Zhipin.

"The overarching message here from regulators is, you need to have your house in order domestically before listing abroad," said Kendra Schaefer, at Trivium China.

The platforms have been told to stop new user registrations during the investigation "to prevent security risks to national data, safeguard national security and protect public interest", the Cyberspace Administration of China (CAC) said.

Hours earlier, the watchdog ordered the removal of Didi from app stores following a similar probe, which it said found the firm's user data collection and use in "serious violation" of regulations. It also cited national security for the probe, in an unusual move against a domestic tech firm.

However, there were no details on what the probe was about, nor when or where the claimed violations took place.

While it does not prevent people from using Didi as existing users can still order rides for now, it throws a wrench in its growth plans after a bumper New York IPO last week raised $4.4 billion, one of the biggest in the US over the past decade.

The ruling also comes at a time of heightened tensions between Beijing and Washington with the tech sector a key issue of disagreement.

Dubbed China's Uber, Didi was founded just nine years ago by former Alibaba executive Cheng Wei, and has gone on to dominate the country's ride-hailing market since it won a costly turf war against the US titan in 2016 and took over its local unit.

- Shifting landscape -

It now claims to have more than 15 million drivers and nearly 500 million users, while its services are available in 16 countries, including Russia and Australia.

Kevin Kwek, senior analyst on Asian financials at Bernstein, said the "trend towards tightening on tech was clear".

Chinese tech companies fell in Hong Kong on Monday as investors assessed the situation, with e-commerce platform Meituan 5.6 percent, Alibaba dropping nearly three percent and Tencent -- which has a stake in Didi -- sliding 3.6 percent.

Tokyo-listed SoftBank, which has a 21.5 percent stake in the firm, plunged 5.4 percent.

Didi, with a near monopoly on ride-hailing, is "the most high profile cyber security case" of its kind, University of Hong Kong law professor Angela Zhang told AFP.

But the action was lauded by state-run Global Times, which said the country must not allow "any internet giant to become a super database of Chinese personal information even more detailed than the state".

A top Didi executive took to social media to rebuff rumours over the weekend that the firm had been sharing domestic data with the United States, saying it would be "absolutely impossible". 

Last year, authorities pulled the plug on a planned record $34 billion IPO by Alibaba's financial arm Ant Group, before launching an anti-monopoly probe into the tech behemoth -- in a crackdown that has since taken in other major internet companies.

That marked a dramatic fall from grace for Alibaba's founder Jack Ma, who has gone from being the darling of China's internet entrepreneurs to going virtually silent.

And the rapidly shifting landscape for tech is fuelling uncertainty, with recent moves "very damaging for perceptions of the predictability and stability of China's regulations", Martin Chorzempa, at the Peterson Institute for International Economics, told AFP.

"They also illustrate that IPOs are dangerous in China, drawing regulator scrutiny to a successful firm," he said.

"Disclosures in IPOs give a sense of the scale of these firms in ways that otherwise would never be known to the public and much of the bureaucracy."

© Agence France-Presse

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