Image: Reuters Berita 24 English - China's $1.2 billion fine against Didi Global puts an end to the ride-hailing company's regulato...
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| Image: Reuters |
Berita 24 English - China's $1.2 billion fine against Didi Global puts an end to the ride-hailing company's regulatory issues, but the retroactive application of regulations and the uncertainty surrounding the company's financial turnaround indicate that things could yet get worse for China's IT sector.
Just over a year ago, Beijing opened a cybersecurity investigation into Didi as part of a broader, unprecedented crackdown on infractions of antitrust and data rules that also targeted some of the most well-known Chinese corporations, including Alibaba Group and Tencent Holdings.
The crackdown reduced the market capitalizations of its tech companies by hundreds of billions of dollars, caused layoffs at some enterprises, made them wary of pursuing new prospects, and even triggered corporate downsizing as they tried to adhere to the new regulations.
The investigation into Didi was among the cases that were being keenly watched for hints on how this could play out. Authorities have recently lowered their tone regarding the crackdown as they sought to stimulate an economy harmed by COVID-19 containment efforts.
However, Didi's fine, which was announced on Thursday, and the punishments meted out to its top two executives were nearly the utmost permitted by the nation's Personal Information Protection Law (PIPL). Furthermore, the Cyberspace Administration of China (CAC) reported that Didi was found guilty of infractions dating back seven years even though the rule was just passed nine months ago.
Additionally, the regulator made no mention of whether it would permit Didi's apps to return to app stores or resume new user registration.
One executive from a Chinese technology giant who declined to be identified due to the sensitivity of the situation stated that if the fine had been much smaller, such as 1 billion yuan ($147.80 million), "that could have improved some of our confidence."
According to Alfredo Montufar-Helu, Director of Insights for Asia at the research organisation The Conference Board, many Chinese tech companies would have been concerned if the PIPL had been applied retroactively.
Many were at risk of being deemed not compliant as a result of this, as well as the fact that China's regulatory framework was changing quickly - aside from PIPL, the country has implemented new and revised regulations on cyber and data security.
"For internet companies, the restrictions will only increase. There is no other option available to internet companies other than to follow the CAC's directives "You Yunting, a senior partner at the Shanghai DeBund Law Firm, stated.
An inquiry for comments made on Friday did not receive a prompt response from the CAC.
NOT RELAXING
As it prepared for Chinese President Xi Jinping to win an extraordinary third term as party leader later this year, Beijing began a push to tighten control over a significant portion of its economy in late 2020. This campaign included a crackdown on the enormous indigenous IT sector.
Regulators stated that their goal was to guarantee the industry's healthy development.
Following a series of meetings this year when officials declared they wished to increase policy support for many sectors of the economy, including online platforms, the Didi investigation has come to a close. Additionally, a nearly nine-month-long block on gaming approvals has been lifted.
Chinese IT leaders, though, claimed that policies to bolster sector confidence were still being developed and that they had come to terms with the fact that the industry's competitive landscape would alter permanently.
One gaming executive said that although the approval of game licences had restarted, indications were that there would only be 700 licences granted year, down from the 1,000 granted before the crackdown by about 30%. 9,369 licences were issued in 2017, the peak year for the business.
"I don't anticipate any looser regulations. If it doesn't get worse, we consider it a success," he said.
6.7660 Chinese yuan (renminbi) are equal to $1.
