The Washington PostDemocracy Dies in Darkness

China’s Didi to delist from U.S. just months after ride-hailing firm’s $4.4 billion offering

Didi raised $4.4 billion in New York earlier this year. Now, it’s delisting in the United States under pressure from Chinese regulators. (Florence Lo/Reuters)

Chinese ride-hailing giant Didi said it will delist from the New York Stock Exchange, a stunning reversal for the leading technology group whose hurried overseas listing in June drew a backlash from Beijing.

In a one-line announcement on Chinese microblog Weibo on Friday in Asia, the company said it had started work to withdraw from the U.S. exchange — where it is known as Didi Global — and had begun preparations to relist in Hong Kong.

The decision is the clearest sign yet that two decades of Chinese technology companies securing huge valuations in U.S. markets is coming to a close, a sea change that threatens to ripple through $2 trillion of Chinese company shares traded in the United States.

Over the last year, the Chinese Communist Party has launched a multipronged campaign to rein in its Internet giants with a particular focus on groups it deems responsible for data insecurity, dodgy labor practices and unfair competition.

China targets ride-hailing giant Didi in data crackdown after U.S. listing

Didi, China’s answer to Uber, fell in the bull’s eye of the crackdown. Responsible for about 90 percent of China’s ride-hailing market, Didi owns vast troves of data on Chinese citizens and drew criticism for its driver pay policies.

Chinese officials have raised concerns that a push by U.S. regulators to strengthen due diligence for U.S.-listed Chinese firms could require Chinese groups to hand over sensitive information. Beijing’s solution has been to encourage companies to list in mainland Chinese or Hong Kong markets, where it retains regulatory control.

Didi’s announcement is a major concession in the company’s bid to mend its relationship with the country’s cybersecurity regulator. The Cyberspace Administration of China (CAC) announced a probe into suspected “illegal collection and use of users’ personal information” days after Didi pulled off an initial public offering in New York in which it raised $4.4 billion. Didi was valued at $68 billion by the end of first day of trading, the biggest U.S. share sale since Chinese online retail group Alibaba listed in 2014.

The conclusion of the CAC’s probe has yet to be announced, but Didi’s share value plummeted amid the uncertainty over its business and relationship with regulators. In recent weeks, its stock has hovered around $8, occasionally nearing $7, or half the value of its initial public offering. Regulators barred Didi from signing up new users and blocked many of its apps from stores.

Didi, founded in 2012 by a former Alibaba employee, was for years hailed as a local champion that proved upstart Chinese firms could take on Silicon Valley. Uber retreated from the Chinese market in 2016, selling its operations to Didi. Like many Chinese Internet start-ups at the time, the company thrived in a regulatory gray zone, pushing back against government attempts at regulation.

Today, the company’s quick fall from grace underlines the sharp shift in government attitudes toward private enterprise, as authorities under top Chinese leader Xi Jinping exert more control over a once-freewheeling tech sector. Sectors as varied as private tutoring, insurance and video games have been the focus of a regulatory crackdown.

“The period of ‘Wild Wild West’ for Internet companies and private companies is over in China, because President Xi has made it very clear that he wants to see an economy where the government plays a major role,” said Henry Gao, a law professor specializing in Chinese trade at Singapore Management University. “The space for private companies is being squeezed.”

Xi Jinping’s crackdown on everything is remaking Chinese society

The sweeping crackdown, launched almost a year ago, has wiped $1.5 trillion from Chinese stocks since February. Chinese tech stocks listed in Hong Kong slumped on Friday after the news about Didi.

Didi is among several high-profile companies to fall under official scrutiny, as authorities target Internet giants whose reach and command over large amounts of personal data is increasingly seen as a threat.

As China’s ties with the United States and other Western countries have worsened, China’s leaders have grown more concerned about that data falling into unfriendly hands. Companies holding data of more than 1 million users must pass a cybersecurity review before listing overseas, according to draft rules released by the CAC in July.

“The Didi case became a turning point in data sovereignty issues in China and the rewriting of China’s listing rules,” said Angela Zhang, director of the Center for Chinese Law at the University of Hong Kong, who focuses on Chinese regulatory governance. “The significance of this case cannot be overstated.”

Didi’s announcement comes a day after the Securities and Exchange Commission announced new rules to allow U.S. regulators to ban or delist foreign companies from U.S. exchanges if they fail to comply with disclosure requirements.

“China feels like they need to take certain measures to counter that kind of threat,” Zhang said.

Lyric Li in Seoul contributed to this report.

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