Chinese authorities on Thursday fined the country’s ride-hailing giant Didi $1.2 billion for data security breaches, the latest in a series of regulatory actions that have plagued the internet industry. Chinese once booming.
The sanction, announced by China’s internet regulator, the Cyberspace Administration of China, ended a year-long investigation into the ride-hailing giant’s data practices that blighted a blockbuster listing in the United States. United and ultimately led to a delisting decision from New York. Sotck exchange. The regulator said it would also fine two senior company executives.
The company violated several Chinese data security laws, the regulator said, by collecting millions of addresses, phone numbers, images of faces and other data.
The eye-watering fine most likely paves the way for the former Wall Street darling to list its shares in Hong Kong. But the regulator’s announcement did not mention whether it would allow Didi to put its app back on Chinese app stores and restore its ability to register new users. The government imposed restrictions on Didi’s operations last July as part of its investigation.
The fine broadly matched penalties paid by other Chinese internet giants, in terms of share of the companies’ annual revenue, during a nearly two-year regulatory crackdown on the sector.
Some analysts have argued that there are signs that a frenetic period of rule-making and tough enforcement by Chinese regulators may be on the wane. Even so, greater government oversight and a willingness to punish China’s innovation leaders seems to have become the new norm. Just this month, China’s antitrust regulator punished Didi and other internet companies for failing to flag mergers for antimonopoly review, while the country’s central bank fined Didi for mishandling customer data. .
In a long list of offenses that included excessive data collection, the Cyberspace Administration of China appointed Didi CEO and Founder Cheng Wei and Chairman Jean Liu. Each was fined approximately $150,000.
“Didi’s illegal operations have posed serious risks to the security of the country’s key information infrastructure and data security,” the regulator wrote.
In a statement, Didi said he accepted the sanction and would take it as a warning to improve the security of his data. “We sincerely thank the relevant authorities for their inspection and guidance, and the public for their criticism and oversight,” the company said.
Tech companies like Didi face a long road to recovery. Regulatory pressures and a longstanding dispute between China and the United States over auditing and compliance have sent stock prices of Chinese tech companies plummeting.
Even as Chinese authorities ease their crackdown on the tech sector, China’s economy has been hit by a broad economic slowdown and is dampening activity resulting from China’s strict Covid controls that have prompted repeated and scattered shutdowns of Chinese cities across the country. Last week, China posted its lowest growth rate since the start of the pandemic as unemployment neared historic highs. A slowdown in consumer spending has hurt Chinese businesses and led some multinationals to warn of falling market demand, once a reliable source of growth.
Rapidly growing and poorly regulated, China’s tech sector has been plagued by excessive data collection and leaks, which have led to widespread online fraud. To address the problem, Chinese authorities have introduced a series of laws that require companies to better communicate with consumers and protect their data.
Yet even as the government has clamped down on the private sector, it has struggled to protect the masses of data it collects on its citizens through regular online and real-world surveillance. In recent weeks, a hacker has offered to sell a Shanghai police database containing billions of records containing the personal information of Chinese citizens. The database had not been secure for months.
For Didi, once hailed as an innovator and disruptor in China’s transport sector, it has been a quick fall from grace. The company was seen as the pride of China’s brave and valuable start-up scene in 2016 when it beat American rival Uber and bought the company’s Chinese operations.