Strict Chinese technical controls ‘to continue’ after record Didi Fine

Strict regulation of Chinese tech giants likely to continue after record $1.2 billion fine on Didi Global last week, as authorities try to encourage growth

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

The Cyberspace Administration of China (CAC) last Thursday fined Didi just over 8 billion yuan ($1.2 billion, £990 million) for violating cybersecurity and data laws, indicating that the government intends to change its policies. to keep large tech companies in check.

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 big tech companies as they seek to boost economic growth.

The government will likely allow Didi to put its apps back on online stores — something it hasn’t done yet — but that won’t mean the end of strict regulations on data protection and other issues, said Trivium China analyst Linghao bao.

Image credit: Tencent

Economic impulse

“Big tech platforms are getting a break because the economy isn’t doing very well,” he said. “Regulators are shifting from campaign-style crackdowns to more rules-based governance.

“But technical regulation is there to stay in the long run.”

Regulators began cracking down 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 on an unprecedented third term as party leader later this year.

Privacy Laws

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

Authorities said Didi violated privacy laws and created cybersecurity risks.

The investigation was also seen as a reprimand for taking its public offering overseas rather than to a Chinese listing, and for pushing through with the listing despite outstanding data security issues with regulators.

The CAC concluded its investigation by saying that Didi had violated the country’s cybersecurity law, data security law and the law on the protection of personal information.

Record fine

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

“The facts of violations of laws and regulations are clear, the evidence is compelling, the circumstances are serious and the nature is despicable,” 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 complying with the explicit requirements” of regulators and “maliciously evaded oversight”, and its “illegal operations” had “posed serious security risks to the security of China’s key information infrastructure and data security,” the company said. regulator.

‘Sustainable development’

Didi said in December it would be delisted from the NYSE and shareholders approved the move in May. The company says it plans to start listing in Hong Kong.

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

“We sincerely accept and resolutely obey this decision,” the company said in a statement. “We will strictly follow the fine decision and the requirements of relevant laws and regulations, conduct extensive and in-depth self-examination and actively cooperate in supervision and full 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 take our social responsibilities seriously. We will serve every passenger, driver and partner well and realize the safe, healthy and sustainable development of the company,” added Didi.

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