Only two days after Didi went public on Wall Street, China’s internet regulator announced that new user registrations on the Chinese ride-hailing platform would be temporarily suspended while the authorities conducted what they called a “cybersecurity review” of the company.
There was no explanation provided for why the review was being conducted or what it would entail in the brief announcement, which was issued Friday evening in China. Its sole purpose was to “protect national data security risks, protect national security, and uphold public interest,” the announcement stated.
When Wall Street trading opened on Friday, Didi’s stock price plummeted by approximately 9 percent.
As a result of Beijing’s surprise intervention, investors were immediately reminded of Ant Group’s failed initial public offering last year. The Chinese fintech giant’s stock sale in Shanghai and Hong Kong was halted at the eleventh hour after regulators summoned company executives to discuss new supervision.
Didi stated in an emailed statement that it would cooperate with authorities. In the statement, it was stated that the company intended to conduct a comprehensive examination of cybersecurity risks as well as continuously improve its cybersecurity systems and technological capabilities.
Didi, China’s leading ride-hailing app, acquired Uber’s China operations in a 2016 deal that brought an end to a period of intense competition between the two companies. Didi is a subsidiary of Didi Chuxing Technology Co., Ltd. Didi’s stock began trading on the New York Stock Exchange on Wednesday, according to the company. According to the company, its service had 377 million active users in China during the fiscal year that ended in March of this past year.
Since Ant’s initial public offering (I.P.O.) was thwarted, Chinese regulators have increased their scrutiny of the country’s broader internet industry, criticising what they call anticompetitive business practises and inadequate safeguards for consumers and their personal data.
Alibaba, the world’s largest e-commerce company, was fined a record-breaking $2.8 billion by China’s antitrust regulator in April. Didi was one of nearly three dozen Chinese internet businesses that were hauled before regulators and ordered to ensure that they complied with antimonopoly regulations a few days later. A statement was quickly issued by Didi, which was published on its website by China’s antitrust regulator, pledging to “promote the development and prosperity of socialist culture and science” while also strictly adhering to the rules.
When it comes to handling user data, major tech platforms are required to adhere to stringent regulations under Chinese law.
To complete a preliminary review and make recommendations to regulators, officials must complete the process within 30 business days, though this deadline can be extended by 15 business days in “complex situations.” Following that, regulators have an additional 15 business days to respond to the recommendations.
According to the announcement made on Friday by the internet regulator, new user sign-ups on Didi will be suspended for the duration of the cybersecurity review in order to “prevent the risks from expanding further.”