Beijing has broadened its crackdown on tech platforms targeting more US-listed companies after ordering the removal of ride-sharing group Didi Chuxing from Chinese app stores in a move that sent tech stocks tumbling.
China’s Cyberspace Administration announced Monday that it is investigating Boss Zhipin, an online recruitment agency, and Chinese trucking apps Yunmanman and Huochebang, which merged into Full Truck Alliance in 2017. The platforms are not allowed to register new users while they are being investigated.
The CAC’s announcement identified suspected violations of China’s national security and cybersecurity laws, without providing details.
The action by the regulatory authorities caused tremors in Asian markets on Monday. Japanese group SoftBank, of which Vision Fund is a major Didi investor, fell 5.4 percent, while Hong Kong internet groups Alibaba and Tencent fell 2.9 percent and 3.7 percent, respectively.
Didi’s shares fell 5.3 percent on Friday, two days after the company was listed on the New York Stock Exchange after raising $4.4 billion in 2014 in the largest listing of a Chinese company in the US since Alibaba. in 2014.
The crackdown by China’s cybersecurity regulator against Didi and others marked a new offensive against the country’s tech companies, relying on previously unused cybersecurity rules. China’s financial and competition watchdogs have already reined in companies like Ant Group and Alibaba, two mainstays of billionaire Jack Ma’s internet empire, and e-commerce group Meituan.
Like Didi, Full Truck Alliance and Boss Zhipin listed in New York in June, raising $1.6 billion and $912 million, respectively.
The three technology groups are market leaders in China and are all backed by Tencent, China’s most valuable technology group, which has avoided the worst of the regulatory crackdown.
The CAC said the probes were conducted under new cyberspace procedures issued on June 1 that strengthened surveillance of companies operating critical information technology infrastructure that could affect national security.
“[Chinese] Regulatory statements in recent months make it clear that it is the primary responsibility of companies to ensure data security before going abroad,” said Kendra Schaefer, technology analyst at Trivium, a Beijing-based consultancy. “The message is: companies are welcome at an IPO abroad, as long as their domestic house is in order first.”
The Global Times, a nationalist Chinese state magazine, said Didi’s international shareholders — including US ride-hailing group Uber — said protecting users’ personal information was a national security issue.
“There is absolutely no better way for an internet giant to master the state of the super database that is the personal data of Chinese people,” the newspaper wrote in an editorial on Monday.
The crackdown began on Friday when the CAC announced it was investigating Didi and ordered the company to stop registering new users and drivers for its app.
On Sunday, the CAC ordered that Didi be removed from the Chinese app stores. The company replied that it would “resolutely implement” the demands of the authorities.
The latest performance came when 34 Chinese companies raised a record $12.4 billion in New York in the first half of 2021. However, more than two-thirds of Chinese groups have fallen below their initial public offering price.
US regulators have stepped up surveillance of Chinese companies listed in the country after Luckin Coffee fabricated hundreds of millions of dollars in sales in a scandal that fueled long-standing fears over audit standards and transparency.
Under a law passed in December, Chinese companies trading on US exchanges are threatened with delisting unless they allow US authorities access to checking accounts, which Beijing has banned.
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