China Fines Didi $1.2 Billion After Wrapping Year-Long Probe
The fine wrapped up a year-long probe into the ride-hailing giant that’s come to symbolize China's bruising campaign against tech.
(Bloomberg) -- China fined Didi Global Inc. more than 8 billion yuan ($1.2 billion), wrapping up a year-long probe into the ride-hailing giant that’s come to symbolize Beijing’s bruising campaign to rein in its powerful internet industry.
Regulators also fined Didi’s chairman Cheng Wei and president Jean Liu 1 million yuan apiece, the Cyberspace Administration of China said in a statement. Didi was found to have violated three laws, and those illegal operations threatened national security, the internet overseer said.
The long-awaited decision on Didi -- which pushed ahead with a $4.4 billion U.S. initial public offering in June 2021 against Beijing’s wishes -- removes some of the uncertainty that at one point wiped more than 80% off its market value. The announcement signals that the worst may have passed for the company, and reinforces expectations that Beijing is easing up on the massive tech sector just as its economy sags under the weight of Covid restrictions and global inflation.
The penalties fall short of the worst fears of some industry observers, who had expected executives or the company to draw harsher punishment. Didi was one of the companies at the heart of a bruising clampdown on the internet industry that Beijing initiated in 2020, when it halted Ant Group Co.’s IPO. Didi’s main apps are now expected to reappear on China’s mobile stores, allowing the ride-hailing giant to again sign up new users and pursue growth.
Read more: Inside Didi’s $60 Billion Crash That Changed China Tech Forever
Sentiment toward China’s internet industry has been volatile this year. Investors have seized on a pledge from economic czar Liu He to support the digital economy as a signal the crackdown is easing, or perhaps even drawing to a close. It remains unclear under what conditions Chinese regulators would allow Didi to resume work on a listing. The company now trades on the pink-sheets market reserved for higher-risk securities.
Didi, once feted as the national champion that drove Uber Technologies Inc. out of China, has since come to symbolize the extent to which Beijing is willing to go to curb the power and influence of its most successful internet corporations.
Didi’s ordeal began in July 2021 -- days after its New York debut -- when China’s cybersecurity watchdog accused the company of violating data rules and ordered more than two dozen of its apps, including those for riders and drivers, suspended from download and new user registration. Didi, forced to delist from US bourses during the investigation, is expected to prepare for a Hong Kong listing.
It still has to grapple with a host of new regulations that govern data security and the welfare of gig economy workers. Revenue slid 13% in the fourth quarter, after the regulatory turmoil allowed rivals like Meituan to encroach on its market share. Its valuation has plummeted from a high of $80 billion before the probe.
Didi’s Move From NYSE to Hong Kong — What to Know: QuickTake
(Updates with details from CAC’s statement in the second paragraph)
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