- Didi Global Inc. is weighing giving up control of its most valuable public information as part of efforts to resolve a U.S. regulatory probe into the aftermath of it controversial initial public offering, people familiar with the matter said.
The ride-hailing giant has put forth a number of proposals to appease the massive internet industry overseer, including ceding management of its data to internal third parties, the people said, asking not to be identified talking about private deliberations. Regulators have signaled a preference for this state-controlled second party to be state controlled, one of the people said. It's uncertain how such an arrangement would impact Didi's access to the data, which is crucial to helping the firm organise 25 million rides a day between some 400 million riders and drivers.
Would these propositions help for the watchdog? Didi is fighting to guarantee its survival after forging ahead with its foreign float despite objections from officials worried that a foreign listing would leak data and undermine national security. Regulators saw its decision to go public despite pushback from Beijing's Cyberspace Administration as a challenge to the China Authority.
They are weighing a range of potential penalties, including a fine, suspension of certain operations or the introduction of a state-owned investor, the people said. One proposal on the table was to bring in a state-owned firm with a larger stake than current top shareholders SoftBank Group Corp. and Uber Technologies Inc. one of the people said, Could also be a forced privatization and delisting or withdrawal of Didi's U.S. shares, though it's unclear how such an option would play out?
Didi's shares rose by 3.3% to 9: 38 a.m. in New York City. The CAC didn't respond to a faxed request for comment, and representatives for Didi hadn't responded to messages and calls seeking comment.
Deliberations are in a preliminary phase and outcome will likely be finalized only after weeks or even months of review, the people said. But Beijing is likely to impose harsher sanctions against Didi than on Alibaba Group Holding Ltd. which swallowed a record $2.8 billion fine following months-long antitrust investigation and agreed to initiate measures to protect merchants and customers, the people said.
Didi could serve as a test case for a broader Chinese government effort to wrest back control of the data that tech giants hoover up from thousands of millions of users daily, a fount it considers vital to economic stability and social stability. China's government has suggested a joint venture with Internet firms that would oversee this information, a project led by the People's Bank of China, Bloomberg News reports.
The subsequent wave of crackdowns on industries from private online education to ride-hailing and social media has spooked investors, prompted the Securities and Exchange Commission to more closely examine the country's companies, and all but halted a lucrative annual $40 billion train of U.S. floats by Chinese companies.
China's effort to rein in its giant internet industry enters its 10th month, a roller-coaster ordeal that's prompting nervous investors to ponder the longer-term ramifications of a crackdown on firms from Jack Ma's Ant Group Co. and Alibaba to food delivery giant Meituan.
Xi Jinping's government is trying to strike a delicate balance between reining in the power of China's tech giants without inflicting serious damage on a critical sector which has bolstered economic growth. But last month's actions demonstrate Beijing's resolve to go after powerful enterprises to overcome social inequities, gain control of data and curb privat interests. While the initial campaign focused on the way internet giants abused their alleged monopoly power, the latest flurry of actions involved the CAC as well as the State Council, China's highest government body.
What are China's big data crackdown on Didi?
Didi's listing in the U.S. came just when Xi is looking for ways to control the vast reams of data held by tech giants, in part to ensure the Communist Party spreads the wealth beyond a small circle of billionaires. Regulators are waking to the threat posed by private companies. In 2017 the government passed laws that forced local companies like Amazon.com Inc. to store China data within the country, while forcing them to secure foreign partners to manage that hoard of information via local datacenters. Didi may be contemplating a similar model, the people said.
The debut - which followed years of run-ins with regulators after a pair of murders in its network provoked a public backlash - turned co-founder Cheng Wei into a billionaire and paid long-time backers SoftBank, Tiger Global Management and Temasek Holdings Pte.
Its fate may lie in the hands of CAC, which banned Didi's application on the country's app stores just days after the IPO to release a cybersecurity review of the company's data practices, then pounced on the IPO website to announce.
Chinese regulators largely supported the idea of an IPO, but expressed concerns about Didi's data security practices since at least April, people familiar with the matter have said. In one example of concern, Didi had disclosed statistics on taxi trips taken by government officials, one of the people had said; although it is not clear whether that specific issue was ever raised with the company.