CWA Commentary

Photo Source: NIAS-GP-Harini
   NIAS Course on Global Politics
National Institute of Advanced Studies (NIAS)
Indian Institute of Science Campus, Bangalore
For any further information or to subscribe to GP alerts send an email to subachandran@nias.res.in
Print Bookmark

CWA # 549, 11 September 2021

China Reader
Alibaba then, Didi now: Three reasons why Beijing is going after its tech giants

  Sukanya Bali

China is trying to have the upper hand on the private industries as well within and outside the country

In July, China's Cyberspace Administration (CAC) launched an investigation of Didi, a ride-hailing company; the latter was asked to stop new user registrations during the investigation. This happened two days after Didi began trading on the New York Stock Exchange and raised USD 4.4billion. Didi's shares fell soon after it opened trading. The crackdown worsened after a week when 25 more Didi apps were removed from the app stores. 

China's tech giant fell under regulator pressure over the last few months. Tech giants in the country were scrutinized as authorities tried to tighten control over the giants to tame their growing monopolistic behaviour. 

The Didi Episode

According to China's Cyberspace Administration (CAC), "Didi's app has serious violations of laws and regulations about the collection of personal information." The investigation was stipulated through Cybersecurity law that came into force in 2017 to "guard against national data security risks, to safeguard national security and the public interest." This gave CAC a large role in the security of data procured by large firms. Will Cheng, a founder of Didi, faced several regulatory probes from Beijing over safety and operation licenses. 

Didi has more than 15 million drivers with 500 million users in China. The services are in more than 15 international markets which gather data from autonomous driving technologies and traffic analysis. On 19 August, China's Ministry of Transport said, "ride-hailing platforms have imposed strategies like arbitrarily adjusting their pricing rules and setting up excessive commission rates after gaining a dominant market position." Didi's share saw 43 per cent value wiped since its debut.

Not just Didi; there is a pattern

Besides Didi, CAC announced to conduct a review of companies, Yunmanman, Trucking Gang, and BOSS Zhipin and also fined companies like Kuaishou, Tencent's messaging tool QQ, Alibaba's Taobao, Neihan Duanzi, and Weibo, and also told them to "rectify" and "clean up" illegal content. Some of the apps were accused of glorifying underage pregnancy. Alibaba has been targeted since founder Jack Ma spoke out against Beijing's regulatory approach to the financial technology sector. Earlier this year, Alibaba was fined USD 2.8 billion for anti-monopoly violations. Soon after, many giants like Meituan, Didi, and Byte Dance were summoned and were ordered to "put the nation's interests first."

Are the tech industries "unfair and anti-competitive" business practices?

Chinese regulators began cracking down on what they called "unfair and anti-competitive" business practices in the internet industry. According to CCTV news, President Xi Jinping "ordered regulators to step up their oversight of internet companies, a crackdown on monopolies and promote fair competition", so that the regulatory supervision on the data security and financial activities can be enhanced. The government has signalled a tougher, deductive approach towards tech firms.

Several laws and mechanisms were put in place to regulate internet companies. In 2020, the Chinese government set guidelines for anti-monopoly rules for tech giants. Beijing's State Administration for Market Regulation (SAMR) ruled to stop price-fixing, predatory pricing, and unreasonable trading conditions." SAMR said, "The behaviour is more concealed, the use of data, algorithms, platform rules and so on make it more difficult to discover and determine what are monopoly agreements." Beijing Data Security Law requires companies to submit reports with critical data, to conduct a risk assessment. Tech giants are also required to classify these data as categories and govern how such data will be stored and transferred to other parties. Third, the second draft of the Information Protection Law, which calls tech platforms to impose stricter measures to ensure the secure storage of user data. The law prohibits, "illegally collecting, using, processing, transmitting, disclosing and trading people's personal information."

Three major concerns for Beijing : National security, data protection, and geopolitics

Chinese internet firms have come under increasing scrutiny from Beijing this year over national security concerns. The legislation passed and regulatory infrastructure that the Chinese are building for data protection indicates that the government is concerned about the user data amassed by the internet companies and the risk associated with the event of misuse.  

The government's policy document focused on stronger capital-market regulation in order to uphold its national security and social stability concerns. This new regulation marks Beijing's involvement in tracking and treating data linked to national security issues. In 2014, Xi Jinping in his first meeting with the steering group, said: "Without cybersecurity, there is no national security. Without IT applications, there is no modernization." With Didi expanding on the foreign land, regulators have accused corporate giants of abuse of their size and market power. CAC enacted rules on security reviews as part of safeguarding the nation's digital infrastructure. 

Beijing had been keen on providing data protection, as China competes with the US for its high-tech leadership. The concern was addressed over "stolen, leaked, damaged and illegally exploited" overseas by the foreign government. Soon after Didi, the IPO regulator stopped signing new users and was asked to remove the app from the mobile store over the data breach concerns. Two more companies, "full truck alliance" and "kanzhum" were suspended over a security review.

For the past year, there have been multiple accusations between Beijing and the US over the data breach. Last year the US, India, and many others attempted to ban the Tik Tok app over the privacy breach accusation. Former President Donald Trump barred companies' investment issues concerning links with the Chinese military. A Chinese FM spokesperson stated that domestic tech companies should not compromise their information when they go public overseas. Companies should submit to the scrutiny of foreign securities regulators.

China revamps its policy to rein over its tech industry amid concerns of user data privacy, anti-competitive practices, and scrutinizing the industries according to their terms. Clearly, the government is trying to have the upper hand on the private industries as well within and outside the country. These announcements by the CCP make tech giants like Didi and Alibaba more accountable and has to show their loyalty to the government over its stringent measures. 

Print Bookmark

Other CWA Publications

NIAS Europe Monitor
October 2021 | CWA # 573

Chetna Vinay Bhora

Europe's Energy Crisis: It could get worse. Five reasons why

read more
The World This Week
October 2021 | CWA # 572

GP Team

China's hypersonic tests, Russia's Afghanistan summit, and EU's Poland challenge

read more
Conflict Weekly 93
October 2021 | CWA # 571

IPRI Team

One year after Samuel Paty's killing, Kidnapping in Haiti, and Instability in Sudan

read more
NIAS Fortnightly on Science, Technology & International Relations
October 2021 | CWA # 570

STIR Team

Cover Story: War against Malaria

read more
The World This Week
October 2021 | CWA # 569

GP Team

India-China military dialogue, G20 summit on Afghanistan, and China-Taiwan tensions

read more
Conflict Weekly
October 2021 | CWA # 568

IPRI Team

ISIS violence in Afghanistan, and Targeted killings in J&K

read more
East Asia
October 2021 | CWA # 567

Aswathy Koonampilly

Japan: New Prime Minister, Old party

read more
The World this Week
October 2021 | CWA # 566

GP Team

Europe's Energy Crisis

read more
Conflict Weekly
October 2021 | CWA # 565

IPRI Team

Anti-Bolsonaro protests in Brazil, UK-France fishing row, Talks with the TTP in Pakistan, and the anti-abortion law protests in the US

read more
NIAS Fortnightly on Science, Technology & International Relations
October 2021 | CWA # 564

STIR Team

The Science and Politics of Materials

read more
The World This Week
October 2021 | CWA # 563

GP Team

Biden's infrastructure bill trouble in the US, and a new Prime Minister in Japan

read more
NIAS Europe Monitor
September 2021 | CWA # 562

Sourina Bej

France: Paris Terror Trial

read more
NIAS Europe Monitor
September 2021 | CWA # 561

Harini Madhusudan

Belarus: Weaponization of the Migrant Crisis

read more
NIAS Africa Monitor
September 2021 | CWA # 560

Apoorva Sudhakar

Africa’s Stolen Future:Child abductions, lost innocence, and a glaring reflection of State failure in Nigeria

read more
Conflict Reader
September 2021 | CWA # 559

Vineeth Daniel Vinoy

Afghanistan: Who is who in the interim Taliban government? And, what would be the government structure?

read more
The World This Week
September 2021 | CWA # 558

GP Team

The Quad reinvigoration, UN General Assembly meeting, Elections in Russia and Canada, and another political turmoil in Tunisia

read more

Click below links for year wise archive
2021 | 2020 | 2019 | 2018