9.3 C
New York
Thursday, March 28, 2024

China Intensifies Crackdown On Didi With New Ride-Hailing RulesĀ 

Courtesy of ZeroHedge View original post here.

Chinese regulators announced a new set of guidelines to increase governance over the country's ride-hailing industry. Stuck in the crosshairs were SoftBank-backed Didi and other Chinese tech companies, according to Bloomberg.  

Beijing continues ratcheting up regulations on tech companies to reshape its digital economy. The latest is six regulatory agencies, including antitrust watchdog, transport ministry, and public security bureau, who issued new rules to limit driving fees companies can charge customers. The rules laid out new rules for companies to provide social insurance for drivers while offering "reasonable" commissions.

The new guidelines also outlined how Didi and other smaller ride-hailing companies must fully employ some drivers rather than subcontracting them out — Didi had previously warned would such a requirement could "fundamentally" change its business model.

Li Chengdong, head of the internet think-tank Haitun, told Financial Times the rules allowing drivers to become full-time employees would "increase costs" for the company that would have a material impact on finances. 

"For Didi that would mean costs would go way up, it would have a huge impact."

The latest order from Beijing follows the Cyberspace Administration of China that demanded the company develop a plan to delist from the NYSE due to concerns about leakage of sensitive information. Proposals also include privatization or a share float in Hong Kong.

Didi, which was listed on the NYSE in July, has seen share price more than halved as Beijing launched a regulatory assault on data security grounds. 

The outlook for Didi remains uncertain as regulators still prohibit new users from signing up for the service and has removed 25 of the company's apps. Didi has set aside $1.6 billion for upcoming fines that regulators could slap the company with as early as December. The good news is, as soon as that happens, Didi apps could return to Chinese app stores.

For more on Didi, Bloomberg Intelligence's Matthew Kanterman and Tiffany Tam said:

Didi Global Inc.'s longer-term growth outlook is clouded by Chinese regulators' crackdown on its use of consumer data, as restrictions could inhibit its ability to efficiently grow its core mobility business and introduce new products. Its near- monopoly of China's $50 billion domestic ride-hailing market, which is expected to more than double by 2025, is a solid foundation for growth as long as Didi can navigate the regulatory situation. Yet its international ride-sharing business and other initiatives may continue to burn cash at a rapid clip. A possible delisting from New York and listing in Hong Kong, as reported by Bloomberg News, suggests a messy road ahead.

Meanwhile, institutional investors have been asking: Is it time to jump into China tech stocks on attractive valuations despite continued threats of regulatory crackdowns? 

To answer that, Belinda Boa, head of active investments for the Asia Pacific at BlackRock Inc., recently said her team is becoming more optimistic about Chinese growth stocks. Blackrock is also getting ready to launch a new China tech

But then there's Ark Investment Management LLC's founder Cathie Wood who is still waiting for the dust to settle after a year of regulator crackdowns. 

Subscribe
Notify of
0 Comments
Inline Feedbacks
View all comments

Stay Connected

157,452FansLike
396,312FollowersFollow
2,280SubscribersSubscribe

Latest Articles

0
Would love your thoughts, please comment.x
()
x