Friday 16 July 2021 3:31 pm

China places state investigators in Didi's offices to conduct security probe

Beijing’s heavyweight state spy industry and six other government departments have swooped on ride-hailing app Didi Chuxing’s offices to conduct a security investigation.

The bold move comes after Chinese authorities opened an investigation into Didi for allegedly violating user privacy, just days after its $4.4bn listing in New York last month.

As of yet, there is no evidence that the ride-hailing giant has committed a data breach, which Didi’s vice-president Li Min called “absolutely not possible” on Chinese social media platform Weibo.

News of the probe sent share prices tumbling 20 per cent at the time, and the company said its revenue would be affected.

Beijing’s new investigation ramp up, first reported in the Financial Times, is the first time the tight-lipped Ministry of State Security has publicly declared it will base officials inside a company.

The investigation will involve the police, tax authorities, market competition regulator and industry regulators for natural resources and transport, according to the Cyberspace Administration of China (CAC) – the digital regulator overseeing the probe into Didi.

It comes just days after the CAC announced that Chinese firms with data on more than 1m users will face security checks before they can list on foreign stock exchanges.

The wider security review will put a focus on risks of data being affected, controlled or manipulated by foreign governments after overseas listings, the (CAC) said on Saturday.

Xi Jinping’s government is concerned about listings in the US, where over 30 Chinese firms raised a record $12.4bn in the first half of this year, according to data from Dealogic.

Two new sets of rules, the Data Security Law and the Personal Information Protection Law, which cover data storage and data privacy respectively, are on track to come into effect this year.

Saturday’s announcement will also require firms to submit the IPO materials they plan to file for review.

The security review, according to the CAC, will consider national security risks as “risk of supply chain interruption due to political, diplomatic, trade and other factors,” and risk of key data “maliciously used by foreign governments after listing in foreign countries.”

But Didi’s Li Min was adamant that the company had done nothing to invite the clampdown, posting on Weibo: “Like many overseas-listed Chinese companies, Didi stores all domestic user data at servers in China, it is absolutely not possible to pass data to the United States.”

The aggressive new step in the government’s probe will likely increase speculation that foreign investors’ appetite for Chinese stocks and IPOs in New York and London could start to wane.