Strict China Tech Controls ‘To Continue’ After Record Didi Fine

Image credit: Didi Chuxing

Strict regulation of China’s tech giants likely to continue after record $1.2bn fine on Didi Global last week, even as authorities seek to encourage growth

Chinese regulators are unlikely to relax their strict controls on the country’s tech industry even after concluding their year-long investigation of ride-hailing giant Didi Global with a record fine last week, industry watchers say.

The Cyberspace Administration of China (CAC) imposed a fine of just over 8 billion yuan ($1.2bn, £990m) on Didi last Thursday, saying it had violated cybersecurity and data laws, indicating the government intends to continue its policy of reining in large tech firms.

The fine, which follows two other major penalties imposed on Alibaba and Meituan, comes as authorities have used softer rhetoric in recent months when talking about large tech companies, as they seek to encourage economic growth.

The government will probably allow Didi to restore its apps to online stores – something it has not yet done – but that doesn’t spell the end for strict regulation on data protection and other issues, said Trivium China analyst Linghao Bao.

Tencent is headquartered in Shenzhen. Image credit: Tencent didi global, ride hailing, china
Image credit: Tencent

Economic impetus

“Big tech platforms are getting a break as the economy is not doing so well,” he said. “Regulators are shifting from a campaign-style crackdown toward a more rules-based governance.

“But tech regulation is here to stay over the long term.”

Regulators began a crackdown on the tech industry in late 2020, as the government seeks to strengthen control over the economy. The move is seen, in part, as a preparation for Chinese president Xi Jinping’s bid to take an unprecedented third term as party leader later this year.

Privacy laws

Didi was hit by an investigation just days after its $4.4bn IPO on Wall Street on 30 June, 2021, a move that forced the company to remove its app from app stores and halt new user registrations.

Authorities said Didi had broken privacy laws and caused cybersecurity risks.

The probe was also seen as a reprimand for taking its public offering overseas instead of a Chinese listing, and for taking the listing ahead in spite of outstanding data security issues with regulators.

The CAC resolved its investigation by saying Didi had broken the country’s cybersecurity law, data security law and personal information protection law.

Record fine

It also imposed fines of nearly 1 million yuan on Didi’s chairman and chief executive Cheng Wei and president Liu Qing, also known as Jean Liu.

“The facts of violations of laws and regulations are clear, the evidence is conclusive, the circumstances are serious, and the nature is vile,” the CAC said in a statement.

Didi committed 16 legal violations, including illegally obtaining information from users’ smartphones and collecting data on facial recognition, age, jobs and family relationships, the regulator said.

The company had “avoided fulfilling the explicit requirements” of regulators and “maliciously evaded supervision”, and its “illegal operations” had brought “serious security risks to the security of China’s key information infrastructure and data security”, the regulator said.

‘Sustainable development’

Didi said in December it would delist from the NYSE and shareholders approved the move in May. The company says it plans to list in Hong Kong.

The company said it “sincerely” accepted the decision and would “resolutely” obey it.

“We sincerely accept this decision, and resolutely obey it,” the firm said in a statement. “We will strictly follow the penalty decision and the requirements of relevant laws and regulations, conduct comprehensive and in-depth self-examination, and actively cooperate with supervision and complete rectification carefully.

“We will take this as a warning and further strengthen the construction of cyberspace security and data security, strengthen the protection of personal information, and earnestly fulfill our social responsibilities. We will serve every passenger, driver and partner well, and realise the safe, healthy and sustainable development of the enterprise,” Didi added.