China continues its crackdown on big tech as the Didi Group Inc. was forced to remove its app from the app store just days after a $4.4 billion public offering in New York.
Didi is China’s version of Uber as it offers rides to its customers through its mobile app platform. The company achieved significant success after it bought out Uber’s operations within the country in 2016. Didi has been able to reach a market value of $68 billion which is much lower than expected estimates due to increasing restrictions from China’s Cyberspace Administration.
China has been reluctant to express the motives for the removal of the app and has only stated that the app may pose serious data security risks and needs to be further investigated. Chinese regulators have also stated that, “Didi had committed serious violations in the collection and usage of personal information and ordered the app pulled.”
China’s crackdown on Didi has been part of the country's crackdown on big tech as over the past five years Didi has dominated the market following the removal of Uber’s Chinese operations. Didi accounted for 88% of total trips in the latter half of 2020.
While Didi is still able to offer its services to those who have already downloaded the app, profits continue to fall for the company as they are gaining no new customers. This comes after a year in which the company received a net loss of $1.6 billion due to the COVID-19 pandemic. The company has been able to absorb these losses to this point. However, if China’s investigation into the company turns up anything that incriminates them the company could be in serious trouble. China has also launched investigations into two other U.S. listed companies – Full Truck Alliance and Kanzhun - just after the investigation was launched into Didi. This appears to be China’s attempt at discouraging companies from listing themselves overseas.
Source: Bloomberg
