China has spent months scaling back some big tech companies over fears they were inhibiting competition, and Beijing is now using data privacy as the next step in a sweeping campaign that threatens to halt global investment in those companies.
The country’s crackdown focused on a company Didi on allegations that the ride-sharing company mishandled sensitive data about its users in China.
The company’s app has been removed from app stores in the country and has warned that it violates laws related to data collection.
Regulatory pressure marred its early days as a publicly traded company in New York, as its shares plunged. Didi has lost about $29 billion in market value from its peak.
The company said it strives to correct any issues, protect users’ privacy and data security, and prevent cybersecurity risks.
The focus on Didi and other US-listed Chinese companies indicates that China’s crackdown on technology has entered a new phase.
Data is becoming increasingly strategic, especially with the proliferation of artificial intelligence, algorithms, and machine learning, along with state-sponsored electronic activities.
With the advancement of computing, the huge hoard of data held by large corporations is becoming increasingly important to government agencies.
This phase of China’s crackdown on technology is defined by the links these companies have to the United States.
And while Beijing’s antitrust investigations have focused on operations within China’s borders, it is hard to ignore the extent to which recent government actions have focused on companies that have sought foreign investment.
China’s concerns about personal data are exacerbated when the data runs the risk of being controlled by US interests.
Growing concerns about data privacy
Chinese regulators began reining in tech companies late last year, when they halted Ant Group’s initial public offering at the last minute due to major issues with its listing.
Since then, Beijing has investigated several companies, including Alibaba and Tencent, for monopolistic behavior or abuse of customer rights.
Didi’s investigation indicates that regulators are now giving themselves a broader mandate when it comes to curtailing the power of big tech companies.
Didi has been accused by the Cyberspace Administration – China’s largest internet watchdog – of serious violations of laws and regulations in the collection and use of personal information. Didi was banned from the app stores.
Leaders of China’s ruling Communist Party have stepped up the data security crackdown by pledging no tolerance for illegal securities activity at home, and said they are further regulating Chinese companies’ ability to list overseas.
The government has said it is strictly regulating the type of information these tech companies send and receive across the country’s borders, and is setting new rules on how sensitive listing-related data is protected overseas.
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Concerns about data privacy in China – especially when the US is involved – are not new. But it is gaining momentum in recent months.
Earlier this year, China’s popular annual consumer rights show sparked a national debate about privacy and surveillance, and companies struggled to stay on Beijing’s side.
Tesla has been in trouble this year over data privacy allegations, which led Musk to publicly say his company’s cars would never be used for spying in China.
Tesla later announced that it had set up a new facility in China to store local user data.
Chinese state media also stressed the need to focus on data privacy and security. The Global Times urged Beijing not to allow Internet companies to become rule makers for the collection and use of personal information.
“Standards should be in the hands of the state to ensure that Internet giants are careful about collecting personal information,” the commentary said.
“China should not let any Internet giant become a database of Chinese people’s personal information that contains more details than the country,” he added. Not to mention giving them the right to use that data.
Data protection is also causing controversy across social media in China. Many users are calling for stricter regulations against companies like Didi to protect private data.
Read also: Study: Your privacy is at risk even without using Facebook or Twitter
The dangers of relinquishing American influence
Tensions between Washington and Beijing have weighed heavily on the current round of China’s crackdown on technology.
Late last year, the United States stepped up pressure on Chinese companies listed on the New York Stock Exchange. And ask her now It opens its books regularly to the US accounting authorities, or else it risks being forced out of the exchanges.
Beijing is trying to limit Didi’s interactions with foreign players, due to the company’s large share of US and Japanese investors.
According to Didi’s initial public offering prospectus. The SoftBank Vision Fund is the company’s largest shareholder with 21.5 percent. It is followed by Uber and Tencent with 12.8 and 6.8 percent, respectively.
And since problems with Alibaba emerged last year. The Chinese government is sending a message to all technology companies operating in the country that you must be an ally of the Chinese government if you want to work safely in China.
On the one hand, it becomes difficult for Chinese platforms to operate in the democratic markets of the world. On the other hand, it is trying to negotiate tougher Chinese domestic controls.
Beijing’s tactics have raised questions about whether overregulation can stifle innovation. Two of China’s most successful entrepreneurs have resigned from high-level positions in recent months.
Global investors may find it risky to own Chinese technology stocks. A fear that could jeopardize Chinese companies’ access to overseas capital.
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