China expanded its latest crackdown on the technology industry beyond Didi Global Inc (滴滴) to include two other companies that recently listed in New York, dealing a blow to global investors and tightening the Chinese government’s grip on sensitive online data.
In a series of announcements that began on Friday and escalated over the Independence Day holiday weekend in the US, Beijing ordered all three companies to halt new user registrations and told app stores to remove Didi’s service from their platforms.
The regulatory onslaught came just days after the ride-hailing giant completed one of the biggest US listings of the past decade, and within weeks of debuts by the other targeted companies: Full Truck Alliance Co (滿幫) and Kanzhun Ltd (看准).
Photo: Reuters
Investors responded by dumping Chinese tech stocks in Hong Kong and sending shares of Softbank Group Corp, a backer of Didi and Full Truck, to a seven-month low in Tokyo. Didi, which tumbled 5.3 percent on Friday, could extend losses when trading resumes in the US today.
While China watchers have been on high alert for regulatory shocks since Beijing scuttled billionaire Jack Ma’s (馬雲) initial public offering (IPO) of Ant Group Co (螞蟻集團) in November last year, the move against Didi and its peers adds a new dimension — cybersecurity — to a clampdown that has so far focused on financial technology and antitrust issues.
The Chinese Communist Party-backed Global Times yesterday said in a column that Didi’s data hoard posed a threat to individual privacy, as well as national security, particularly since its top two shareholders — Softbank and Uber Technologies Inc — were foreign.
Beijing’s targeting of recent US listings might chill the pipeline of overseas IPOs that have enriched Wall Street and Chinese private firms alike. That could in turn fuel concerns of an economic decoupling between China and the US, at least in sensitive areas such as technology, as Chinese President Xi Jinping (習近平) and US President Joe Biden take steps to limit the flow of capital and expertise between the two superpowers.
Helping tech companies sell shares in New York has been a particularly lucrative business for firms such as Goldman Sachs Group Inc and Morgan Stanley, both of which were key underwriters of the Didi IPO.
Among the questions still lingering for global investors, Chinese tech bosses and US regulators are: Which companies might enter Beijing’s crosshairs next? And in Didi’s case, should investors have been given more explicit warnings about China’s clampdown before the IPO?
“Didi seems to have rushed up their IPO process, indicating that there might be early signs of upcoming government scrutiny,” said Shen Meng (沈萌), director of Beijing-based boutique investment bank Chanson & Co (投行香頌資本). “The Didi probe, together with the other investigations announced today, show how the tensions between China and the US [are] spilling over into the capital markets. The incident will suppress Chinese companies’ desire to go public in the US.”
The latest probe is part of a wider crackdown on China’s largest Internet companies, as the government seeks to tighten the ownership and handling of the troves of information they gather daily from hundreds of millions of users.
As part of the reviews, the Cyberspace Administration of China ordered Didi, Full Truck Alliance’s Huochebang (貨車幫) and Yunmanman (運滿滿) platforms, as well as Kanzhun’s Boss Zhipin (直聘) to halt new registrations, although existing customers can continue to use their services.
On Sunday, Didi said on social media that it had already halted new user registrations as of Saturday and was now working to rectify its app in accordance with regulatory requirements.
It offered its sincere thanks to authorities for their oversight.
In a follow-up statement, Didi said that the regulatory move might have “an adverse impact” on its revenue in China.
The investigation comes hot on the heels of Didi’s float, which listed in New York on Wednesday after a US$4.4 billion IPO — the largest by a Chinese firm in the US after Alibaba Group Holding Ltd (阿里巴巴). Softbank owned about 20 percent of Didi following the listing, while Uber’s stake was about 12 percent, an earlier Didi filing said.
Didi cofounder and Chief executive Will Cheng (程維) owned about 6.5 percent, just ahead of the 6.4 percent held by Tencent Holdings Ltd (騰訊).
Softbank yesterday sank 5.4 percent in Tokyo trading to the lowest since Dec. 8 last year.
Other tech stocks fell in Hong Kong trading. Tencent retreated as much as 4.5 percent, touching its lowest level this year. Alibaba sank more than 3 percent, while Meituan (美團) and Kuaishou Technology (快手科技), a short video streaming platform that listed in Hong Kong earlier this year, tumbled more than 7 percent.
“It’s clear that there’s a regulatory overhang on China’s tech giants at the moment, and that may continue to weigh on sector valuations for the large Internet platforms,” Bloomberg Intelligence analyst Matthew Kanterman said.
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