On Monday, July 26, China’s Ministry of Industry and Information Technology announced a six-month campaign to regulate companies that “disrupt market order, damage consumer rights, or threaten data security.” President Xi Jinping is looking to reassert his control over homegrown tech giants that have gotten a bit too out of control as China’s economy has boomed.
Didi Chuxing: A Threat to National Security
Authorities appear to be concerned that Chinese companies such as Didi Chuxing, a ride-sharing app, could provide sensitive data to political competitors as they move to the U.S. markets. The Beijing-based business debuted in the U.S. stock market on June 30, despite being warned by Chinese officials amid cybersecurity concerns. After the company raised $80 billion in valuation within two days, the Cyberspace Administration of China launched an investigation into Didi for issues related to “national data security.”
All app stores in China were ordered to remove the popular app due to “serious violations of laws and regulation in collecting and using personal information.” After losing 20% of its value, the company released a statement apologizing and reaffirming cooperation with the Chinese government and its investigation on July 10.
Xia Hailong, a lawyer from a tech regulation firm, thinks “China is systematically enhancing its supervision and law enforcement in the cybersecurity field.” U.S. IPOs such as Didi’s could add a whole new realm of challenges for government regulators in supervising the firms expanded abroad. Entry into foreign markets, such as the United States, could create a vulnerability in the Chinese government and citizenry for adversaries to access sensitive information.
Last year, Donald Trump attempted to make a similar move with TikTok. The social media app had access to an immense amount of Americans’ user data. The former president issued executive orders to ban TikTok, but those were halted by U.S. courts and later reversed by President Joe Biden.
The popular video-sharing app is owned by China’s ByteDance, and the company consistently asserted it did not pose a national security threat to the United States. Similarly, Didi promised last week they had not transmitted any of their user data to the U.S.
According to a senior fellow at Yale Law School Paul Tsai China Center, the data Didi collects is “considered sensitive from a national security standpoint.” The biggest point of concern is not protecting users, but rather protecting power and security. The Chinese Communist Party is dedicated to controlling its country through state media, the Great Firewall, and limiting free speech. The rule-makers of data can either be the government or the tech giants, and the Chinese Communist Party would much rather have the power in their hands.
The last thing the government wants is to lose an ounce of power, accessibility, or influence in the tech industry. The companies expanding into other countries are making independent decisions and movements that pose a threat to the strength of the CCP.
Meanwhile, in the U.S.
For years now, real regulation in the technology industry has been gridlocked in Congress due to partisanship, lobbying, interest groups, and checks and balances. With a one-party government, China has the capability to act swiftly and aggressively against its tech giants.
The goals of the two national governments are not so different. China’s tightening of data security laws for firms with a presence outside of China matches the United States’ qualms about data privacy and spying by foreign countries, such as China, through foreign social media apps. The government and political systems in the U.S. have kept meaningful legislation from passing and making an impact. Many of the tech giants in the U.S. rest their opposition to regulation on an argument that we may be seeing fall to pieces. According to them, too many antitrust and privacy laws could hamper their abilities to compete with China’s tech counterparts on a global stage. However, if China requires their firms to maintain their domesticity and limit their extension into foreign markets, that concern over battling foreign competition may no longer be a problem.
Read more from Keelin Ferris.