Authorities in China on Thursday fined ride-hailing giant Didi $1.2 billion for data security violations.
The fine, announced by China’s internet regulator, the Cyberspace Administration of China, ended a year-long investigation into the ride-sharing giant’s data practices that ruined a blockbuster list in the United States and ultimately led to a decision to delist from New York. Stock market. The regulator said it would also fine two top executives of the company.
The company has broken 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 will most likely pave the way for the one-time Wall Street darling to list his shares in Hong Kong. But the regulator’s announcement did not mention whether it would allow Didi to put his app back in Chinese app stores and restore the ability to register new users. The government had imposed restrictions on Didi’s activities last July as part of its investigation.
The fine largely matched the fines paid by other Chinese internet giants, in terms of the companies’ share of annual revenue, during a nearly two-year crackdown on the industry.
Some analysts have argued that there are signs that a frenzied period of regulation and tough enforcement by China’s regulators is waning. Yet more government oversight and a willingness to punish China’s innovation leaders seems to have become the new norm. This month alone, China’s antitrust regulator punished Didi and other internet companies for failing to report mergers for antimonopoly control, while the country’s central bank fined Didi for mishandling customer data.
In a long list of violations, including excessive data collection, China’s Cyberspace Administration selected Didi’s chief executive and founder, Cheng Wei, and its president, Jean Liu. Each was fined approximately $150,000.
“Didi’s illegal operations have created serious security risks for the security of the country’s key information infrastructure and data security,” the regulator wrote.
In a statement, Didi said it accepted the punishment and would take it as a warning to improve its data security. “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 pressure and a prolonged dispute between China and the United States over auditing and compliance have weighed down the share prices of Chinese tech companies.
Even as Chinese authorities ease their crackdown on the tech sector, the Chinese economy has been hit by a broad economic slowdown and is dragging on activity as a result of China’s strict Covid controls that have led to repeated dispersed lockdowns of Chinese cities across the country. whole country. Last week, China posted its lowest growth rate since the start of the pandemic as unemployment hit historic highs. A slowdown in consumer spending has hurt Chinese companies and has led some multinationals to warn of dwindling market demand, once a reliable source of growth.
China’s fast-growing and loosely regulated technology sector is plagued by excessive data collection and leaks, which have led to widespread online fraud. To solve the problem, Chinese authorities have introduced a series of laws that force companies to better communicate with consumers and protect their data.
But despite the government having reined in the private sector, it has struggled to protect the masses of data it collects about its citizens through regular online and real-world surveillance. In recent weeks, a hacker offered to sell a Shanghai police database containing billions of records containing the personal information of Chinese citizens. The database had been unsecured for months.
For Didi, once hailed as an innovator and disrupter in China’s sedate transportation sector, it’s a quick fall from grace. The company was considered the pride of China’s feisty and valuable startup scene in 2016 when it defeated its US rival, Uber, and bought the company’s Chinese operations.