[ The fallout from Beijing’s crackdown on the ride-hailing app Didi has ensnared even those who made it a point to not mix business with politics.]
By Li Yuan
Over the past week, Mr. Liu became
collateral damage when the ride-hailing giant Didi,
where his daughter, Jean Liu, is president, came under fire after its blockbuster
initial public offering in New York.
Chinese regulators ordered the
company to stop signing up new users. They said Didi should also be pulled from
Chinese app stores because of national security concerns and to protect the
data of Chinese users.
The Chinese internet immediately
savaged Didi and Ms. Liu — and then Mr. Liu. A hashtag,
#Didiapppulledfromappstores, which was started by the official People’s Daily,
was viewed more than one billion times over a 24-hour period on the Chinese
social media platform Weibo. Weibo users called Didi a “traitor” and a “walking
dog of the United States.” They urged the government to also punish Mr. Liu for
selling out national interests.
Beijing’s actions against Didi —
and the fallout — were part of a broadening crackdown by China against its
homegrown tech companies. The shift began in November when regulators quashed the
I.P.O. of Ant Group, the tech and financial company run by the
billionaire Jack
Ma. At the time, many viewed Beijing’s moves against Ant and Mr. Ma as
inevitable to rein in the power of Big Tech.
The clampdown on Didi may have an
even deeper impact. It is a strong signal from Beijing to discourage listings of
Chinese tech companies in the United States, businesspeople and entrepreneurs
said, especially as the two countries battle for tech supremacy.
By going after Didi and a few other
U.S.-listed internet companies for data security concerns, Beijing has effectively
laid the last brick of the digital Berlin Wall that increasingly separates the
Chinese internet from the rest of the world. Beijing has made it clear that it
is serious about keeping important data within its borders while pressuring its
tech elites, who are among the biggest beneficiaries of globalization, to show
their loyalty and obedience, they said.
On Tuesday, China punctuated the
change by announcing that it would enhance rules on data
security and cross-border data flows for Chinese companies seeking to sell
shares abroad. The changes were designed to ensure that companies listed abroad
take their responsibilities in information security seriously.
Internet infrastructure operators
like Didi must now prove their political and legal legitimacy to the
government, Ma Changbo, an online media start-up founder, wrote on his WeChat
social media account.
“This is the second half of the
U.S.-China decoupling,” he wrote. “In the capital market, the model of playing
both sides of the fence is coming to an end.”
Didi, Ms. Liu and Mr. Liu didn’t
immediately respond to requests for comment.
China’s internet companies have
benefited from the best of two worlds since the 1990s. Many received foreign
venture funding — Alibaba, the e-commerce giant, was funded by Yahoo and
SoftBank, while Tencent, another internet titan, was backed by South Africa’s
Naspers. They also copied their business models from Silicon Valley companies.
The Chinese companies gained
further advantages when Beijing blocked almost all big American internet
companies from its domestic market, giving its home players plenty of room to
grow. Many Chinese internet firms later went public in New York, where
investors have a bigger appetite for innovative and risky start-ups than in
Shanghai or Hong Kong. So far this year, more than 35 Chinese companies have
gone public in the United States.
Now the Didi crackdown is changing
the calculations for many in China’s tech industry. One entrepreneur who has
set her sights on a listing in New York for her enterprise software start-up
said it would be harder to go public in Hong Kong with a high valuation because
what her company did — software as a service — was a relatively new idea in
China.
A venture capitalist in Beijing
added that because of China’s data security requirements, it was now unlikely
that start-ups in artificial intelligence and software as a service would
consider going public in New York. Few people were willing to speak on the
record for fear of retaliation by Beijing.
At the same time, the United States
has become more hostile to Chinese tech companies and investors. As Washington
has ramped up its scrutiny of deals that involve sensitive technologies, it has
become almost impossible for Chinese venture firms to invest in Silicon Valley
start-ups, several investors said.
In May, U.S. lawmakers introduced
a bill to bar Chinese firms from listing on U.S.
exchanges if they didn’t comply with the same auditing standards as American
companies. After Didi filed for its I.P.O., Senator Marco Rubio, Republican of
Florida, urged American regulators to block the listing.
Caught between an increasingly
authoritarian government and an escalating geopolitical rift with the United
States, China’s tech entrepreneurs and investors said they needed to rethink
their positions in the new world.
That is especially true for people
like the Lius, who are a kind of royal family in China’s tech industry.
When Lenovo
acquired IBM’s personal computer division in 2005, Mr. Liu became the
first Chinese chief executive to lead the takeover of a major American
business.
Ms. Liu herself is a true product
of globalization. After graduating from Harvard University, she spent over a
decade at Goldman Sachs before joining Didi in 2014. Known as a “fund-raising
machine,” she helped the ride-hailing firm secure billions of dollars from
investors, including SoftBank and Apple.
She also helped Didi pull off the
high-wire act of going public. The company was among the Chinese tech giants that
had come under increasing regulatory scrutiny since late last year. The company
was fined in April for failing to clear mergers and acquisition transactions.
It was also reprimanded and lectured by regulators to compete fairly and treat
its drivers and passengers fairly.
When Didi set its I.P.O. date on
June 30, a day before the Chinese
Communist Party celebrated its centenary, it kept a low profile. It didn’t
set up a ceremony to ring the bell at the New York Stock Exchange, even
virtually, which has been a tradition for companies that go public. Didi also
urged its employees to refrain from sharing any celebratory messages on social
media.
Two days later, Chinese regulators
struck.
In response, Didi denied that
because it had gone public in New York, it had to turn over user data to the
United States. A Didi executive said on social media that the company stored
all its Chinese data on servers in China.
But many articles and social media
posts pointed fingers at the company, and some online users said they had
deleted the app. The attacks soon turned personal.
“Didi sold the country for its own
benefit!” screamed the headline of one popular online post. “Liu Chuanzhi will
become the next Jack Ma who deserves to be cracked down!”
For Mr. Liu — who had made his no
politics remark in the summer of 2013, shortly after Mr. Xi came to power and
started cracking down on influential
online voices — it was clear that his longtime strategy would no
longer keep him out of the fray. Whether he likes it or not, politics and tech
in China are now inextricably intertwined.
