China cracks whip on 3 more tech firms, opens cyber security probes

The Cyberspace Administration of China (CAC) has opened a cyber security probe on three tech firms, including US-listed Boss Zhipin and subsidiaries of Full Truck Alliance, to prevent national data security risks in the country. Chinese regulators named Yunmanman and Huochebang, subsidiaries of the New York-listed Full Truck Alliance.

The latest regulatory crackdown, as per CNBC, comes after the CAC ordered China’s app stores to remove ride-hailing app Didi for download just days after its initial public offering (IPO) in the United States. It alleged Didi had illegally collected users’ personal information and asked the company to fix the problems.

In June, Beijing had passed a new Data Security Law that lays out how companies collect, store and use data. The Chinese government is also focused on antitrust and financial technology regulation. Alibaba, in April was fined a whopping $2.8 billion fine in anti-monopoly probe and Meituan, a food delivery firm, is being probed for the same.

According to the Wall Street Journal, the government is calling on big tech companies like Tencent, online retailing giant Alibaba Group Holding Ltd and ByteDance Ltd to open up the data they collect from social media, e-commerce and other businesses. Analysts believe the playing field for China’s tech sector is undergoing a sweeping releveling, while critics say the tech industry had, in the pursuit of growth at all costs, coalesced behind a few monopolistic giants, while crowding out true competition and innovation.

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Rebecca Fannin, author of Tech Titans of China, said these companies have been allowed to flourish without a lot of scrutiny. “This crackdown could just be the beginning.” Rui Ma, an angel investor and co-host of the TechBuzz China podcast, pointed out that up intil 2015, the message for China’s tech titans was growth at all costs. But now, he said the government wants more stable and sustainable growth.

The most highlighted case is Alibaba – Ant Group. Chinese regulators fell on this e-commerce giant after they noted that the company’s opaque classification helped it sidestep regulations and the unit only backed around 1% to 10% of loans itself, with the rest coming from large commercial banks. Regulators decided that the $330 billion of outstanding debt that Ant Group was exposed to at the end of June, as per its initial public offering prospectus, presented significant systematic risk to China’s entire financial system.