Blockage comes days after its mega US IPO

The high riding Didi Chuxing app has been blocked in China, as the country’s cyberspace regulator ordered app stores to remove it from their offering.

This has dealt a major blow to Didi Global, which just days ago pulled off one of the largest US initial public offerings of the last decade. Didi, which is one of the single largest investments in SoftBank’s portfolio, defeated Uber Technologies Inc. in China in 2016 before embarking on an ambitious international expansion.

It started trading on Wednesday in New York after a US$4.4-billion initial public offering, pulling off the largest debut by a Chinese firm in the US after Alibaba. Bloomberg reports that the Cyberspace Administration of China announced the ban Sunday, citing serious violations on Didi Global Inc’s collection and usage of personal information, without elaborating.

The unusually swift decision came two days after the regulator said it was starting a cyber-security review of the company. The ban effectively requires the largest app stores in China, operated by the likes of Apple Inc and smartphone makers, Huawei Technologies and Xiaomi Corp. to strike Didi from their offerings.

However, the current half-billion or so users can continue to order up rides and other services so long as they downloaded the app before Sunday’s order. The surprise probe and rapid decision by China’s powerful internet regulator piles on the scrutiny of Didi over issues ranging from antitrust to data security.

The company has been grappling with a broad antitrust probe into Chinese internet firms with uncertain outcomes for Didi and peers like major backer Tencent Holdings. It lost as much as 11 per cent of its market value at one point on Friday, after the watchdog revealed its investigation.

More broadly, Beijing has been curbing the growing influence of China’s largest internet corporations, widening an effort to tighten the ownership and handling of troves of information that online powerhouses from Alibaba Group Holding to Tencent and Didi scoop up daily from hundreds of millions of users.

Didi ordered to rectify problems

According to Bloomberg, the latest move against Didi underscores the uncertainty surrounding the Chinese government’s crackdown on the internet sector. Earlier this year, the State Administration for Market Regulation announced it was looking into alleged abuses including forced merchant exclusivity arrangements at Meituan, also days after China’s third-largest internet company raised US$9.98 billion from a record share placement and convertible bonds sale.

The regulator on Sunday ordered Didi to rectify its problems following legal requirements and national standards, and take steps to protect the personal information of its users. On Sunday, the company said on social media that it had already halted new user registrations as of July 3 and was now working to rectify its app in accordance with regulatory requirements.

Still unknown what Cyberspace Administration of China is looking into

In a follow-up statement, Bloomberg said Didi advised that the regulatory move may have “an adverse impact” on its revenue in China. Cyberspace Administration of China didn’t specify on Friday what it will look into.

But the timing of its announcements was significant, coming not just on the heels of Didi’s IPO but also the Communist Party’s 100th anniversary celebrations in Beijing. Didi had to settle on going public at a far lower market value than previously targeted.

It debuted about US$67 billion, barely up from its last round of funding in 2019, and far short of the most bullish expectations for US$100 billion, a reflection of the regulatory scrutiny that’s hounded it ever since a pair of murders in 2018 that founder Cheng Wei has called its “darkest days”.

The Beijing-based firm responded to the subsequent crackdown with a fusillade of efforts to improve security across its network. It began to explore new businesses to offset slowing ride-hailing growth from car repairs to grocery delivery.

That served it well during the coronavirus pandemic, when whole cities came to a standstill. The company delivered an US$837 million profit in the March quarter – a rarity among recent high-profile IPOs like Kuaishou Technology.