Chinese leading ride-hailing platform Didi has seen a dramatic fall from the heights of its $4.4 billion IPO in New York to its disappearance from all mobile stores in China over the past several weeks. Less than 48 hours after Didi’s blockbuster Wall Street debut on June 30, Chinese regulators announced a cybersecurity investigation into the company with the purpose of “protecting national security and the public interest”. New user signs-ups on Didi were suspended, and downloads of the services were blocked.
Beijing’s resolve to rein in the country’s fast-growing Internet industry has cast a shadow of uncertainty over the country’s dominant tech player Didi, which used to be a darling of investors. As of July 26, Didi’s share price had fallen as much as 43% from its early-July peak to $8.06 apiece, wiping out roughly $32 billion of market value and taking the stock below the $14 IPO share price. Besides heightened regulatory pressure from authorities, an increasingly shrill blend of nationalist and anti-capitalist sentiment among Chinese netizens has also acted as a catalyst for Didi’s turmoil, creating an unprecedented scenario on social media.
Since China’s Internet watchdog launched a probe into Didi, groundless rumors about the company selling sensitive user, geographic and traffic data to the U.S. have widely circulated online. On social media platforms like Weibo and Zhihu, users have shared a 2015 big data analysis that used aggregated data from Didi to illustrate the amount and patterns of overtime that staff at central government agencies clocked, citing it as evidence to back their claims of Didi leaking sensitive national security secrets, tech media outlet Protocol reported.
Sophia Wang, an analyst with an investment bank which served as one of the joint underwriters in Didi’s offering, found netizens’ allegations against Didi “ridiculous”. “To sell shares in the U.S., Didi must undergo a listing procedure with the SEC, which is mandatory and absolutely normal. I don’t understand how this could evolve into an act of treason,” Wang said in an interview with Pandaily, speaking on the condition of anonymity. “It’s all about politics. I don’t think the company itself has any problems.”
On the other hand, Wang agreed that nationalistic web users’ conspiracy was consistent with Beijing’s push to declare data a national asset, and could even add legitimacy to the campaign. “The rumors have reinforced the trend towards stricter supervision by the Chinese government of cross-border data flows and overseas listings,” Wang noted.
On July 10, China’s cyberspace regulator proposed new rules that would require companies holding data on more than 1 million users to undergo a cybersecurity review before listing their shares overseas, citing the risk that such data and personal information could be “affected, controlled and maliciously exploited by foreign governments”.
Netizens’ anger against Didi was also partially provoked by the ride-hailing giant’s previous monopolistic behavior and a long-running resentment of the rich in Chinese society.
The state-owned Xinhua news agency asked in a commentary published in early May why Didi’s users are paying more fares, while drivers are making less, calling on regulators to look into the platform’s pricing mechanisms. Following the criticism, the company disclosed details on its income structure for the first time, stating that drivers on Didi’s ride-sharing network on average earn 79% of what customers pay, and the firm took a 30%+ cut of just 2.7% of the trips on its platform. Didi also vowed that it would improve its payment structure for drivers and fares for users in the future.
But netizens don’t buy the company’s promise. Regulators’ decision to open a cybersecurity review of Didi received an enthusiastic response from nationalistic web users.
“These capitalists are bloodsucking ghosts. They trade national interests for economic interests,” one Weibo user wrote.
“China is a socialist country. We should overthrow these evil capitalists!” another said.
Some Didi users staged a boycott campaign by deleting the app and posting screenshots online to show their determination. A list of suggested ride-hailing app alternatives has been reposted over 20,000 times on Weibo.
After devastating floods hit the central province of Henan last week, Didi announced that it would donate $100 million yuan to help ensure the personal safety of local people and purchase disaster-relief supplies. The company’s move was met with mixed reactions from netizens.
“$100 million yuan is only a small portion of the profits Didi earned by exploiting drivers and selling national security secrets to Americans,” one Weibo user commented.
“Capitalists are all chameleons. They are so good at using money to win favor with the masses,” another netizen wrote in a sarcastic tone.
However, some web users were calling on people to view the event objectively. “In a matter-of-fact way, Didi has performed a good deed,” one commenter said. “The generosity that Didi has shown is worth praising, but the investigation into the company should continue as well,” another replied.
Bloomberg reported on July 22 that Chinese regulators are considering “serious” penalties for Didi, including a fine that could exceed the record $2.8 billion Alibaba paid earlier this year, a suspension of certain operations, the introduction of a state-owned investor and even a forced delisting of its U.S. shares, citing unnamed sources familiar with the matter.