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In a new round of crackdowns, China is now targeting companies that collect data and potentially use it illegally. On Sunday, Chinese regulators ordered that the local app stores remove Didi from the list of available applications. This comes after the company allegedly participated in the illegal collection and use of personal data.
Besides the ride-hailing app Didi, the authorities are reportedly also probing into Boss Zhipin – an online recruitment platform backed by Tencent, and Full Truck Alliance subsidiaries, Yunmanman and Huochebang. All of these have recently debuted on stock exchanges in the US.
According to Didi, they were unaware before the IPO that the CAC would launch a probe into them or suspend them. Reportedly, the Cyberspace Administration of China (CAC) reports directly to a body that is chaired by the President of China, Xi Jinping.
As China intensifies its crackdown on tech giants across the country, companies are squirming to get out of the line of fire. Strict regulations of monopolistic practices, antitrust breaches, and data collection have affected several services in China – most notably the finance sector. From suspending Ant Group’s IPO and fining Alibaba $2.8 billion for antitrust breaches, the regulators are now turning their focus to tech.
Tech, especially fintech, is a huge driver of economic growth; therefore, tighter regulations were bound to come around. While the probes into Didi, Full Truck Alliance, and Zhipin all come under existing regulation, Chinese authorities have been busy creating new frameworks. The Data Security Law that was passed in June is meant to come into effect as of September, while the Personal Information Protection Law is still in the works.
According to Andy Rothman, an investment strategist with Mathews Asia, this is China’s approach to creating a regulatory structure. Their method of dealing with entrepreneurs so far has been “go ahead and give this a try. And then we’ll step in there after we see how it works and decide how to regulate it,” he explained.
While some believe this is China’s way of creating a regulatory framework, others insist that the probes highlight China’s dismay over local tech companies flooding to the US for their IPOs. Every time the Chinese government opens a probe or questions a company’s practices, its share price plummets, threatening investor sentiment. Perhaps this is China’s way of deterring reception of these IPOs in the West. Does that mean all Chinese companies interested in a USA IPO could be in danger of facing similar probes?
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