Just two days after the Chinese ride-hailing giant Didi Chuxing launched its U.S. initial public offering (IPO), the Chinese communist regime’s Cyberspace Administration started a security review on the company and suspended its registration of new users. The action caused Didi’s stock to fall on the New York Stock Exchange (NYSE).
On July 2, the Cyberspace Administration of China (CAC) announced on Chinese social media site Weibo that it is conducting a cyber security review on Didi to “prevent national data security risks and maintain national security,” citing China’s National Security Law and Cyber Security Law. Meanwhile, it has suspended all new user registration on Didi to “prevent the expansion of risk.”
In response, Didi stated that it would “actively cooperate with the cyber security review, comprehensively inspect and investigate network security risks, and continue to improve the cyber security system and technical capabilities.”
Didi’s opening price on the NYSE on June 30 was $16.82 per share, a 20 percent increase from the IPO issuance price of $14 per share. But investors’ interest dropped in a day, with Didi closing at $14.20, and the company’s market value reaching a little over $69 billion. This figure is well below the highest valuation $100 billion for Didi a few months ago.
Some analysts believe that due to continuing tensions between China and the United States, Didi is at the center of a U.S.–China “cold war on technology.” For investors who are worried, the Chinese company still has much to prove. Investors may also have reservations over the Chinese regime’s regulatory organs that have control over Didi.
Beijing passed a National Intelligence Law in 2017, which requires Chinese citizens and companies to collect intelligence for the communist regime.
Didi was founded in Beijing in 2012 by former Alibaba manager Cheng Wei, and has become China’s largest ride-hailing service. It forced Uber out of the mainland Chinese market five years ago. It’s one of the top 10 U.S. listings in the past decade and the largest U.S. IPO by a Chinese company since Alibaba in 2014.
The cyber security review comes amid a recent clampdown on Chinese Big Tech firms by the communist regime in the name of “anti-monopoly,” forcing them to restructure. The regime’s leader Xi Jinping has set the clampdown as one of the priorities for 2021.
In April, Didi was among 34 major Chinese tech companies, along with Alibaba and Tencent, that were summoned by the regime’s State Administration for Market Regulation. They were ordered to do internal inspections and to “put national interests first,” and were warned to “stop any malign competitive behavior.”
Xi has been promoting his version of the Mao era’s hardcore socialist planned economy, turning China toward the far-left. The nationalization of private companies in the name of “anti-monopoly,” such as Jack Ma’s Alibaba transferring its Ant Group to China’s Central Bank, has raised fears of the transformation of private enterprises into “joint state-private” firms and eventual total nationalization.