China Fines Didi $1.2 Billion as Outlook for Tech Sector Remains Cloudy

A logo of Didi Chuxing in Hangzhou in Zhejiang Province, China, on Sept. 4, 2018. STR/AFP via Getty Images

The Chinese regime fined ride-hailing giant Didi 8.026 billion yuan (about $1.2 billion) for data security breach following a yearlong probe that forced the company to delist from the United States.

The Cyberspace Administration of China (CAC) said on July 21 that its investigation had found Didi violated the Cyber Security law, Data Security law, and Personal Information Protection law.

The cybersecurity watchdog also fined Didi’s chief executive Cheng Wei and President Jean Liu 1 million yuan (about $148,000) each.

The CAC didn’t mention whether or when it would allow DiDi’s apps to return to the country’s App stores or when Didi could resume registering new users. Since last July, Chinese authorities have restricted such moves pending investigation.

The CAC investigation into DiDi began in June 2021, making it one of the high-profile targets during the regime’s regulatory crackdown on the country’s homegrown tech giants that started in 2020.

A driver opens the Didi Chuxing ride-hailing app on his smartphone in Beijing on July 2, 2021. Jade Gao/AFP via Getty Images

In a separate statement on Thursday, the internet regulator said Didi “conducted data processing that seriously affected national security.”

In response to the fine, Didi said it “sincerely accepted” the decision. The company would “conduct comprehensive self-examination and in-depth rectification,” according to a post published on the microblogging platform Weibo.

Environment Remains ‘Troubling’

Didi’s fine would be equal to about 4 percent of the firm’s $27.3 billion sales last year. The penalty is less than the $2.75 billion fine paid by Alibaba last year, accounting for 4 percent of the e-commerce giant’s 2019 domestic sales. Alibaba’s fine was imposed by the regime’s antitrust regulator.

Didi has faced mounting pressure from Chinese regulators. The CAC probe began just two days after Didi made its debut on the New York Stock Exchange, raising $4.4 billion from global investors in one of the largest U.S. initial public offerings (IPO) of the decade.

China’s cybersecurity watchdog had asked Didi to delay its IPO and carry out a thorough self-examination weeks before the company went public, but Didi pushed ahead anyway, the Wall Street Journal reported last July.

The company lost 80 percent of its market cap, or more than $60 billion, during the yearlong regulatory scrutiny, according to Bloomberg. Didi exited the U.S. stock market in June.

While the announcement of the over $1 billion fine may mark the end of the cybersecurity watchdog’s probe, Didi has come under scrutiny from the regime’s other regulators as well. The company received two fines this month alone.

On July 15, China’s central bank slapped a total of 4.27 million yuan (about $631,000) fines on the Beijing-based company for mishandling users’ data and failing to verify customers’ identification.

The State Administration for Market Regulation on July 11 announced a 500,000 yuan (about $73,890) fine on Didi and its subsidiaries, along with Alibaba and Tencent, for failing to disclose merger deals. The fine marks the maximum amount China’s antitrust watchdog can impose.

“This closes a very difficult chapter for Didi but the business environment for tech companies remains troubling,” said Fraser Howie, an expert on the Chinese financial system.

Eva Fu and Reuters contributed to the report.