Billions of dollars were wiped from the value of the Chinese ride-sharing app Didi on Tuesday after a crackdown on the country’s tech sector by Chinese authorities sparked a sell-off.
The company’s shares fell 22% to $ 12, days after it was listed on the New York Stock Exchange, reducing its market value by about $ 17 billion.
It was the first opportunity for investors to trade shares in the company since the China Cyberspace Administration (CAC) ordered Didi on Sunday to be removed from mobile app stores in China. The CAC said it was investigating Didi’s handling of customer data, to protect “national security and the public interest.” Wall Street was closed on Monday for Independence Day.
Beijing also said Tuesday that it would tighten the rules for companies seeking to list abroad, in a move that analysts said would further restrict the ambitions of Chinese companies abroad.
The government said in the new guidelines that it needed to strengthen “cross-border regulatory cooperation” and amend laws and regulations “on data security, cross-border data flow and other confidential information management.”
The sell-off wasn’t limited to Didi; Shares of other US-listed Chinese parent companies also fell sharply on Tuesday, including trucking company Full Truck Alliance, also investigated by the CAC, and contracting platform Kanzhun.
It is the latest in a series of regulatory crackdowns by Beijing against tech companies in China, including e-commerce company Alibaba, which is listed in the US and Hong Kong.
Analysts said Beijing’s recent actions against overseas listed companies marked a significant move in a radical crackdown on its booming and once free online “platform economy.”
“The crackdown on Didi opens a new front in China’s technological assertiveness; this is now a question of sovereignty,” Rory Green, Chinese economist at investment research provider TS Lombard, wrote in a note.
“The battle for data sovereignty is beginning and China is already fully mobilized. It is increasingly clear that governments around the world have recognized the importance of data and the need to regulate utility as private companies controlling its production and flow. “
Didi’s problem came two days after its mega IPO in the United States last week. On Friday, authorities announced an investigation into the company, which has more than 377 million active users and 13 million drivers in China.
Then on Sunday, China’s cyberspace regulator ordered smartphone app stores to remove the Didi app after it alleged that the company had “illegally collected personal data from users.” Around the same time, the regulator also ordered the online recruiting platform Boss Zhipin and two truck transport services run by the Full Truck Alliance to stop registering new users.
State property Global Times said the move showed Beijing’s “determination to improve data security.”
“Regulatory actions against Didi, which came as China stepped up its crackdown on illegal activities on online platforms, including violations of antitrust and privacy laws, showed the determination of Chinese regulators to strengthen protection of information and personal data, “the popular tabloid said, citing local analysts.
Responding to the regulator’s actions, Didi said he hoped that the removal of the app “could have an adverse impact on its revenue in China.” Didi also promised that he will “seriously rectify and reform existing problems and … conscientiously ensure the security of the personal information of numerous users.”
“We sincerely thank the departments responsible for guiding Didi in inspecting the risks,” the company said on Chinese social media late Sunday.