China concludes Didi cybersecurity probe, lifts ban on new users

SINGAPORE – Chinese regulators are ending a year-long investigation into transportation giant Didi Global a company

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And two other US-listed tech companies are preparing early this week to lift the ban on adding new users, people familiar with the discussion said.

Regulators also plan to allow mobile apps for Didi, Full Truck Alliance’s logistics platform a company

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And Kanzhun Online Recruitment Company Ltd.

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Back on local app stores, also early this week, people said. The apps were removed last July when Chinese authorities opened data security investigations into the companies, citing national security reasons.

As concerns grow about the rapid deterioration of China’s economic outlook, Beijing has moved to halt its crackdown on domestic tech giants and their hard-data.

After Chinese passenger services giant Didi appeared on Wall Street, Beijing said it plans to toughen rules on domestic companies looking to raise money overseas. Yoko Kubota of the Wall Street Journal takes a Didi tour to explain what the campaign means for China’s tech giants and investors. Image caption: Ang Lee

The three companies went public in the United States last June and raised nearly $7 billion in total. Shortly thereafter, Internet regulators in China began cybersecurity reviews. Didi was hit particularly hard – its market value plummeted in the following months, and less than a year after its US listing, the Beijing-based company decided to de-list it from the New York Stock Exchange.

The combined market capitalization of the three companies is about $25 billion, compared to about $115 billion on July 1 — just before the investigations were announced — according to FactSet.

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

The people said that authorities are expected to present the outcome of investigations into these companies around the same time. The three companies are expected to face financial penalties, they said – a relatively large fine for Didi, relatively lenient with the other two, some people said.

Some people said companies are also expected to offer 1% stakes to the state and give the government a direct say in corporate decisions.

The Department of Cyberspace did not immediately respond to written questions. The companies did not immediately respond to requests for comment.

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

People familiar with the case said that cybersecurity agents began months-long on-site inspections. They said agents questioned top executives, downloaded internal records and collected emails and internal communications.

Some people familiar with the investigations said that authorities did not find significant problems with the companies.

Around October, the Department of Cyber ​​Security suggested that the three companies explore separate listings in Hong Kong. In May, Didi said its shareholders had approved its plan to delist from the New York Stock Exchange. Didi had told shareholders that it needed to be delisted before it could solve a cybersecurity investigation in China, and that it would pursue the listing in Hong Kong.

Full Truck Alliance is also moving ahead with a plan to float shares in Hong Kong, with a goal of listing by the end of the year, according to a person familiar with the matter. The person added that the company was likely to earn less than it did in the United States.

At a Politburo meeting in April, Chinese leader Xi Jinping said any oversight of the tech sector would be more unified in support of the “healthy development” of tech companies. At a meeting in May with the Chinese body including tech executives, the CPPCC’s top political advisory advisor voiced support for a stronger digital economy, signaling a regulatory delay for the tech giants.

revision
The combined market value of US-listed Chinese companies, Didi Global, Full Track Alliance, and Canzon was about $115 billion on July 1, before China’s cyber security regulator announced that it was investigating the Didi case. An earlier version of this article incorrectly mentioned the July 2, after the investigation was announced. (corrected 6 June)

write to Keith Zhai at keith.zhai@wsj.com and Lisa Lin at Liza.Lin@wsj.com

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