China signals broad clampdown on company data, offshore listings

Crackdown wipes out billions from Didi, other US-listed companies

China issued a sweeping warning to its biggest companies, vowing to tighten oversight of data security and overseas listings just days after Didi Global’s contentious decision to go public in the US.

Under the new measures, China will improve regulation of cross-border data flows and security, crack down on illegal activity in the securities market and punish fraudulent securities issuance, market manipulation and insider trading, a statement by China’s cabinet said.

While the statement from China’s State Council on Tuesday was thin on details, it suggests Beijing is preparing to intensify a crackdown on its corporate sector that has spanned everything from property debt and fintech to antitrust issues and now cybersecurity.

China will also check sources of funding for securities investment and control leverage ratios, it said.

Rules for overseas listings will be revised, the State Council said, while publicly-traded firms will be held accountable for keeping their data secure. 

The move comes after the cyberspace regulator announced a probe into Didi, which controls almost the entire ride-hailing market in China, and pulled the company’s app from stores. The strong response from Beijing, which came just days after the $4.4 billion IPO, prompted Didi’s shares to plunge as much as 25 per cent in early US trading on Tuesday. 

The latest statement marks an escalation in President Xi Jinping’s campaign to bring the nation’s technology firms — and their reams of valuable data —under control.

Didi plunges below IPO price

In the morning trade,  American depositary shares of the Beijing-based ride-hailing giant fell  to $11.58, wiping out about $22 billion of market value and taking the stock below its $14 IPO price. 

A crackdown on the nation’s big tech names has knocked about $42 billion off the market value of firms listed on the Nasdaq’s Golden Dragon China Index, which tracks Chinese ADRs, since the government derailed the planned IPO of giant Ant Group in November. 

Further moves included a record $2.8 billion fine on Alibaba Group Holding after an antitrust probe found it had abused its market dominance, sparking concern about the future of the sector.

“The Chinese government’s tactics appear to have the twin purposes of keeping its corporate leaders in check while also making sure the investor pain lands primarily in the US more so than China,” said Michael O’Rourke, chief market strategist at JonesTrading.