China prepares to fine ride-hailing giant Didi more than $1 billion
Once known as China’s answer to Uber, Didi was one of the most prominent targets of the widespread crackdown on the sector, which endured years of runaway growth and outsized monopolies before regulators stepped in.
The fine imposed over Didi’s cybersecurity practices would account for more than four percent of its total revenue of $27.3 billion last year and pave the way for its new Hong Kong stock listing, the Wall Street Journal reported on Tuesday.
Citing unnamed sources familiar with the matter, the Journal said the government will ease its restrictions on Didi’s operations once the fine is announced.
The firm has been blocked from adding new users and its apps have been removed from online stores in China by regulators.
The WSJ report sparked a rally in Chinese tech stocks in Hong Kong on Wednesday, with investors hoping the two-year regulatory storm that gripped the sector was nearing its end.
E-commerce giant Alibaba is up four percent, while gaming titan Tencent is up 2.5 percent in early trade.
Didi found itself in hot water in June last year after allegedly pursuing an IPO in the United States against Beijing’s wishes.
Days after the company raised $4.4 billion in New York, Chinese authorities launched a cybersecurity investigation into the company and dropped its shares.
If confirmed, Didi’s fine would be the largest imposed on a Chinese tech company since Alibaba was ordered to pay $2.75 billion in April 2021 as a penalty for anti-competitive practices.
Didi did not immediately respond to an emailed request for comment.
Its shareholders voted in May to delist the company from the New York Stock Exchange.
The move is expected to pave the way for a Hong Kong listing, which was reportedly suspended after China’s top internet watchdog told executives its proposals to prevent security and data leaks were insufficient.
China’s regulatory crackdown has eased this year as it grapples with the economic fallout from its zero-Covid strategy and the country struggles to meet its 5.5 percent growth target.
However, there is still a strict regulatory environment for tech companies: President Xi Jinping last month called for stronger oversight and security in fintech.
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