Why Is Chinas Tech Sector Slumping?
Official threats have scuttled listings and smashed share prices: Beijing has begun a savage and very public assault on some of Chinas most well-known IT companies. The travails of Didi Chuxing, the worlds largest ride-hailing company, served as a cautionary lesson for digital heavyweights this week: what goes up can come down and fast. Didis app was prohibited from stores in its enormous Chinese market only days after a $4.4 billion IPO, causing stock to plummet and investors to file lawsuits. A day later, two other US-listed Chinese corporations announced similar cybersecurity investigations on their platforms. Beijing is injuring its own companies, driven by monopoly and data fears, national pride, and the all-powerful Chinese Communist Partys control reflexes. Here are a few of the causes for this. At first glance, the goal appears to be to clean up a once-freewheeling environment in which enterprises with large amounts of sensitive user data thrived in a vast home market with minimal regulation. Beijing has recently toughened up its network security rules while also voicing alarm about excessive data collecting, presumably to safeguard users from exploitation  akin to US concerns about popular Chinese apps. Analysts, though, believe that deeper factors are at work. There is nothing the ruling Communist Party despises more than things breaking out of their control, said Kendra Schaefer of consultant Trivium China. The goal appears to be to create a control mechanism, with one possible conclusion being a cybersecurity assessment that might allow regulators to halt IPOs. While Beijing has encouraged companies to expand internationally, a flurry of internet companies going public in other countries is likely to have drawn regulators attention. These IPOs are taking place without the necessary regulatory approval, Schaefer told AFP. At least, thats how Chinese regulators see it.  As Chinas internet firms amass vast amounts of personal data on everything from transportation habits to payments, President Xi Jinpings government is becoming increasingly concerned about who owns it. Part of the anxiety derives from the possibility of sensitive data leaking outside the countrys borders. In an uncommon move, Chinas internet watchdog cited national security as a reason for its recent investigation against Didi, eventually ruling that its collecting of personal data was illegal. After an initial public offering (IPO) that was welcomed with excitement, the companys stock plummeted by 24% on Tuesday. Didi is now being sued by US shareholders for failing to disclose ongoing conversations with Chinese regulators. Over 100 apps were required to fix data collecting concerns in May, tightening the screws across Chinas tech architecture. Brief News from Washington Newsday.