Didi Global’s decision Friday to delist from the New York Stock Exchange follows months of pressure from a Chinese government that has increasingly prioritized guarding valuable domestic data over facilitating foreign investment.
Didi’s announcement to switch its listing to Hong Kong comes less than six months after the ride-hailing giant’s splashy debut on Wall Street. Beijing’s pressure campaign began just days after the June IPO, with authorities launching a probe of the company on national security grounds and ordering to halt app downloads from app stores.
Didi shares tanked in New York on Friday on the news of delisting, closing at USD 6.07, down 22%. It debuted on the NYSE on June 30 at USD 14.
Beijing was driven by fear that Washington could gain access to consumers’ personal information or data tied to China’s economic conditions through Didi.
“Switching its listing from America to Hong Kong almost completely eliminates concerns about data leaking from China at the behest of US regulators,” a senior local government official in China said.
Beijing sees big data as a valuable resource that is central to winning global competition and seeks to keep a tight rein. The protection of domestic data figures prominently in Chinese President Xi Jinping’s political calculation as he prepares to seek an unusual third term at next year’s twice-a-decade Communist Party congress.
The 2017 Cybersecurity Law and the Data Security Law and Personal Information Protection Law that took effect this year have reinforced barriers keeping important information from flowing out of China. But this is far from a new trend—authorities have for years used the Great Firewall to control Chinese cyberspace.
The country had shut out American tech companies like Google and Facebook by 2010, while cultivating its own private-sector giants, such as Tencent Holdings and Alibaba Group Holding. Companies like Hikvision, the world’s top maker of surveillance cameras, have used Beijing’s coronavirus countermeasures as an opportunity to branch out.
China’s leadership is confident in domestic players’ ability to grow in the country’s isolated online ecosystem. A government-affiliated think tank expects China’s digital economy to expand more than 50% between 2020 and 2025, with the bulk of this coming from Chinese companies.
Meanwhile, even if it has become harder for Chinese companies to list in the US, few expect the flow of money to be cut off altogether.
“Moving the listing to Hong Kong is a compromise to help foreign investors recover their money easily,” a finance insider in Beijing said. Lenovo Group and Tencent are among the Chinese enterprises that have succeeded in raking in capital from overseas through the Hong Kong stock market.
A shift in Xi’s economic focus ahead of the 2022 party congress further complicates the picture for Didi and compatriots. As the Chinese leader sets the stage for a longer reign, he has pivoted away from predecessor Deng Xiaoping’s “get rich first” mindset to emphasize “common prosperity”—distributing wealth to reduce inequality.
The “common prosperity” campaign is putting pressure on highly profitable companies to give back to society. A number of tech companies, as well as executives in the field, have touted contributions to causes such as decarbonization and alleviating poverty. Didi has signaled its cooperation with the effort with donations to flood relief in Henan and Shanxi provinces.
Valuations in China’s tech sector have slumped as the government clamps down. Alibaba’s market capitalization has deflated by half over the past year as its core e-commerce business has lost steam, on top of the postponement of the much-anticipated public offering of finance affiliate Ant Group. Didi’s market cap has also fallen to about half where it was at its stock’s listing.
A survey by a government-linked think tank found that listed Chinese internet companies lost nearly 30% of their value over the three months through September.
Meanwhile, there has been speculation recently about the government imposing a data tax on large technology companies.
“If the trend of cutting back overseas connections continues, technological progress at internet companies could suffer over the long term,” a researcher well-versed in the tech sector warned.