China Is Killing Its Tech Golden Goose
The Communist Party of China’s crackdown on ride-hailing firm Didi over supposed data-security concerns seems to be just the beginning of a wider campaign to assert control over the country’s thriving tech sector. Foreign investors hoping that Chinese leaders will realize their folly and reverse course should think again.
CLAREMONT, CALIFORNIA – US politicians from both congressional parties are worried that China is overtaking America as the global leader in science and technology. In a rare display of bipartisanship, the normally gridlocked Senate passed a bill in early June to spend close to $250 billion in the next decade to promote cutting-edge research. But lawmakers may be fretting unnecessarily, because the Chinese government seems to be doing everything possible to lose its tech race with America.
The latest example of China’s penchant for self-harm is the sudden and arbitrary regulatory action taken by the Cyberspace Administration of China (CAC) against Didi Chuxing, a ride-hailing company that recently raised $4.4 billion in an IPO on the New York Stock Exchange. On July 2, just two days after Didi’s successful offering, which valued the firm at more than $70 billion, the CAC, a department of the ruling Communist Party of China (CPC) masquerading as a state agency, announced a data-security review of the company. Two days later, the CAC abruptly ordered the removal of Didi from app stores, a move that wiped out nearly a quarter of the firm’s market value.
The CPC’s crackdown against Didi under the pretext of data security seems to be just the beginning of a wider campaign to assert control over China’s thriving tech sector. On July 9, the CAC further shocked tech entrepreneurs and their Western investors with an official announcement that all companies with data from more than one million users must pass its security review before listing on overseas stock exchanges. Once fully implemented, this new policy could choke off Chinese tech firms’ access to foreign capital.