The Wild West days of Big Tech in China are truly over. Days after Didi Chuxing debuted on the New York Stock Exchange, Chinese regulators accused the country’s largest ride-hailing service provider of improper collection and usage of user information, and ordered its temporary removal from app stores.
For the first time, they cited national security grounds. But that’s not all.
The Cyberspace Administration of China (CAC) has also announced probes into Boss Zhipin, an online recruitment company, and the Full Truck Alliance of Chinese truck-hailing apps Yunmanman and Huochebang, for suspected breaches of national security and cybersecurity laws. Both Full Truck Alliance and Boss Zhipin listed in New York last month.
They and Didi are all backed by tech giant Tencent.
The message is unmistakable: data protection and compliance are top priorities in national security. But this is hardly a “Made in China” phenomenon; regulators in the United States and the European Union have been getting tough on data protection, and to reverse the financial clout and monopolistic powers of Big Tech.
Traditionally, the China Securities Regulatory Commission (CSRC) has been the go-to authority with its more traditional financial supervision, but CAC has taken on more responsibilities in the new regulatory landscape.
Details are undisclosed, but the authorities said the latest probes were being conducted under new cyberspace procedures enacted to strengthen the oversight of companies operating critical information technology infrastructure that could touch on national security. Under new US securities laws, foreign companies must comply with stringent auditing and disclosure standards, or risk delisting.
There is no indication that Didi had handed over private data in the US. But Chinese authorities are no doubt concerned about the rush for US listings.
Data protection standards and firewalls must first be established to supervise the handling of vast data by domestic tech companies before they list overseas. There needs to be airtight compliance with Chinese regulations.
In recent times, tech mammoths Meituan, Tencent, Ant Group and Alibaba Group Holding, which owns this newspaper, have been reined in.
At a time of rising tensions with the US, Beijing needs to make sure that Chinese companies follow strict standards in their handling of data, especially if they are going to Wall Street. National security and data protection must always take priority.
But Beijing also wants the domestic tech companies to step up their game to invest in innovation. They can’t go on exploiting vast data collections and their hitherto lightly regulated use to gain a monopolistic market edge.
Such regulatory tightening can only impose greater discipline on an industry that is crucial to innovation and productivity gains.