China to Conclude Didi Cybersecurity Probe, Lift Ban on New Users

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SINGAPORE—China is concluding yearlong probes into ride-hailing giant

Didi Global Inc.

DIDI 35.67%

and two other U.S.-listed tech companies, preparing to lift a ban on adding new users, people familiar with the discussion said, in the latest sign that Beijing wants to spur economic activity, including from its beleaguered tech giants.

Chinese regulators plan as well to allow the mobile apps of Didi back on domestic app stores, the people said. The apps were removed last July when Chinese authorities opened a data-security probe into Didi, citing national-security reasons. The lifting of the new user ban and app restorations could both happen as early as this week, the people said.

Authorities are also lifting limits on registering new users on apps run by Chinese logistics platform Full Truck Alliance Co. and online recruitment firm Kanzhun Ltd., the people said. Both were subject to similar cybersecurity reviews by regulators around the same time as Didi.

Full Truck Alliance began to accept new mobile app user registrations late Monday, following The Wall Street Journal’s report earlier in the day on the expected removal of restrictions on new users.

Shares in Didi, Full Truck Alliance and Kanzhun surged in U.S. trading Monday, with Didi’s American depositary receipts rising more than 50% early and trading around 34% higher by midday.

With concerns growing over a rapid deterioration in China’s economic outlook, Beijing has moved to pause its campaign to tighten its grip on homegrown tech giants and their troves of data.

Didi became one of the symbols of the crackdown, which also entangled companies including online retailer

Alibaba Group Holdings Ltd.

and food-delivery giant

Meituan,

which were fined $2.8 billion and more than $500 million, respectively, for anticompetitive practices.

But the slowdown that followed—including layoffs at big tech companies, long a draw for the young and bright in China—was more severe than expected. China’s Covid-19 restrictions have also added to headwinds, increasing pressure on Beijing to inject momentum in the economy.

While last year saw an onslaught of new regulation aimed at tech giants, this year has been quiet on the regulatory front.

The cybersecurity probes of Didi, Full Truck Alliance and Kanzhun came as Beijing was adopting a new data-security law that took effect in September last year. Just days after Didi’s June 30 listing on the New York Stock Exchange, Chinese regulators stunned investors by announcing its investigation into the company, concerned that IPO documents required by U.S. regulators might contain sensitive information and data.

Didi’s market value plummeted in the following months. And less than a year after listing its shares in the U.S., the Beijing-based company decided to delist from the New York Stock Exchange.

After launching the probe into Didi, China said it would tighten rules for overseas listings. Data-heavy Chinese companies that had looked to list in the U.S. have mostly shifted their plans to mainland China exchanges or to Hong Kong. The conclusion of the probe is unlikely to change that, but for Didi, it removes the regulatory overhang and allows it a way forward.

Didi, Full Truck Alliance and Kanzhun now have a combined market capitalization of about $25 billion, compared with around $115 billion last July 1, just before the investigations were announced, according to

FactSet.

Chinese government authorities including the Cyberspace Administration of China conveyed the plan in meetings last week with executives from Didi, Full Truck Alliance—also known as Manbang Group—and Kanzhun, the people said.

After Chinese ride-hailing giant Didi made its Wall Street debut, Beijing said it plans to tighten rules for homegrown companies looking to raise money overseas. WSJ’s Yoko Kubota takes a Didi ride to explain what the crackdown means for China’s tech titans and investors. (Originally published July 9, 2021) Photo illustration: Ang Li

Authorities are expected to deliver a conclusion of the probes into these companies around the same time, the people said. The three companies are expected to face financial penalties, they said—a relatively large fine for Didi, relatively lenient for the other two, some of the people said.

The companies are also expected to offer 1% equity stakes to the state and give the government a direct role in corporate decisions, some of the people said.

The Cyberspace Administration didn’t immediately respond to written questions. The companies didn’t immediately reply to requests for comment.

Last July, China’s internet watchdog ordered the companies to stop adding users and app-store operators in China to remove Didi’s mobile apps, saying they were collecting personal data illegally. The companies said at the time that they would fully cooperate with the review.

Cybersecurity agents launched monthslong on-site inspections, people familiar with the issue have said. Agents have questioned senior executives, downloaded internal records and collected emails and internal communications, they have said.

Some people familiar with the investigations said the authorities didn’t find substantial problems with the companies.

At an April Politburo meeting, Chinese leader

Xi Jinping

said that any oversight of the technology sector would be more standardized to support the “healthy development” of tech companies. At a May meeting with attendees including tech executives, China’s top political advisory body, the Chinese People’s Political Consultative Conference, expressed support for a stronger digital economy, signaling a regulatory reprieve for tech giants.

Around October, the Cybersecurity Administration suggested the three companies explore separate listings in Hong Kong. In May, Didi said its shareholders approved its plan to delist from the New York Stock Exchange. Didi had told shareholders it needed to delist before it could resolve a cybersecurity probe in China, and that it would pursue a listing in Hong Kong.

Full Truck Alliance is also pushing ahead with a Hong Kong share-offering plan, with the goal of listing by year-end, according to a person familiar with the matter. The company is likely to raise less than it did in the U.S., the person added.

In Hong Kong on Monday, the 30-stock Hang Seng Tech Index built on earlier gains to close 4.6% higher.

Write to Keith Zhai at [email protected] and Liza Lin at [email protected]

Corrections & Amplifications
U.S.-listed Chinese companies Didi Global, Full Truck Alliance and Kanzhun had a combined market capitalization of about $115 billion last July 1, before China’s cybersecurity regulator said it was investigating Didi. An earlier version of this article incorrectly cited a figure from July 2, after the investigation was announced. (Corrected on June 6)

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