Days after China's biggest taxi service DiDi Chuxing got itself listed on the New York Stock Exchange, the Cyberspace Administration of China (CAC) banned the application and got it removed from app stores. The Chinese government has cited a breach of customer data as the reason behind the punitive action.
Meanwhile, DiDi has said that it will fully cooperate with the investigation. It, however, said, “The company expects that the app takedown may have an adverse impact on its revenue in China.”
On June 30, DiDi rolled out its initial public offering worth $68 billion. This was the second-biggest public listing in the US by a Chinese company, after Alibaba Group Holding Limited. Soon after, the application raised $4.4 billion from the market.
What is the probe about?
The CAC, without giving specifics, has said that it’s conducting a cybersecurity review of the company to 'prevent data security risks, safeguard national security, and protect public interest'. According to CAC, DiDi indulged in wrongful collection and usage of customer data. So far, it has not been disclosed if a penalty would be levied on the cab service app or not.
Connection between DiDi's IPO & its removal from app stores?
Market and political experts believe that DiDi's move to go public in the United States has not gone down well with the Chinese Communist Party. Hence the action. Earlier, the Chinese internet regulator had also targeted Full Truck Alliance Company and Kanzhun Limited, the other two Chinese companies which recently rolled out their IPOs in the United States. Earlier, fintech giant Ant Group was slapped with a record $2.8 billion fine after an antitrust probe found it had 'abused' its market dominance.
How big is DiDi?
DiDi has the lion's share of the cab service market in China. In the fourth quarter of 2020, 88 percent of all cab bookings went to DiDi. Five years ago, the company bought the operations of its major rival DiDi after an expensive price war. However, the massive reach of DiDi may have also worked against the application, feel experts as Beijing has been cracking down on the nation’s giant tech firms to curb their 'growing influence'.
