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China’s targeting of ride-hail giant Didi is a new front in its tech crackdown

China sees the data on its citizens (and other nations’) as a national strategic asset that enhances the party’s control and supports its technological aspirations and geopolitical ambitions.

The extraordinary amounts of data China collects on its people provides it with a material advantage in pursuing its goal of achieving global leadership in artificial intelligence applications.

China sees the data on its citizens (and other nations’) as a national strategic asset that enhances the party’s control and supports its technological aspirations and geopolitical ambitions.

There are projections by the global market intelligence firm, International Data Corporation, that by the middle of this decade China could control as much as a third of the world’s data.

Until Didi, its authorities had generally cloaked their crackdown on the big private sector tech companies by claiming it was acting in response to anti-competitive and monopolistic behaviour.

Didi is different. In the weeks leading up to its IPO the authorities warned it to delay its listing but Didi (perhaps foolishly) went ahead with the float, with its defiance provoking the strongest of responses from the CAC, which cited national security grounds for its unprecedented interventions.

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There is an international dimension to China’s desire to access and control the data held by the big tech companies.

The government is demonstrably concerned that the US-listed companies it is now targeting – and Chinese companies that might aspire to list outside China – might make that data available, whether wittingly or not, to others. A spate of listings in the US by Chinese companies this year – nearly $US8 billion was raised in the six months to June – may have heightened those concerns.

In the background there is a long-running dispute between the US and China about the ability of America’s Public Company Accounting Oversight Board (which audits the auditors of US public companies) to get access to the working papers of the Chinese auditors of Chinese companies listed in the US.

Last December, US Congress, urged on by the Trump White House, passed a law that gave US-listed companies three years to comply with demands for access to auditors’ papers or face de-listing. Last month the Senate passed a bill reducing the period to two years.

China is vehemently opposed to giving US agencies access to those papers, despite a string of accounting scandals by US-listed Chinese companies and the continuing evidence of the poor quality of its domestic audits and credit ratings provided by a steady stream of large company defaults on supposedly high-quality bond issues.

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Its concern is about cross-border data transfers and, most particularly, access to the extensive data the digital giants (which collect enormous amounts of data whether it is relevant to their core activity or not) being available to US agencies.

If the Chinese authorities see the data as having national security implications, their concerns are understandable, even if their opposition to having US-listed Chinese companies leads to the companies – with a combined market value of more than $US2 trillion – being booted off US exchanges and losing access to US capital.

Following the actions against Didi and the other firms the authorities said they would act against “illegal securities activities” and create a framework for the extra-territorial applications of China’s securities industry laws.

It’s not yet clear what that means although, along with the announcement that the rules for overseas listings will be revised and regulatory oversight of companies trading in offshore markets will be increased, it might suggest Beijing is determined to sever the lengthy pipeline of Chinese technology companies planning to list in the US, and force those already listed to delist.

Apart from giving China firmer control of its big private sector companies and the data and capital they hold, that would also be in line with the de-linking of China’s economy from America’s, which both countries are pursuing as the competitive intensity and level of hostility in their relationship continues to heat up.

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