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On 30 June, Chinese ride-hailing giant Didi raised $4.4 billion on US stock markets, the second-largest overseas listing of a Chinese company, after e-commerce colossus Alibaba’s $25 billion share issue in 2014. Two days later, the Chinese government ordered all app stores in the country to take the Didi app off.

Beijing says it is investigating Didi for violating data privacy and national security laws. The allegation is that Didi has been sharing personal and sensitive data collected from hundreds of millions of its drivers and users (including movement of government and Communist Party officials) with the US. Two other recently-US-listed companies are being probed too: Full Truck Alliance, known as China’s ‘Uber for trucks’, and recruitment site Boss Zhipin.

Xi Jinping is the supreme leader of the Chinese government, the Chinese Communist Party (CCP) and also the People’s Liberation Army. People in China live under a surveillance regime unparalleled in history. Almost every move they make is watched and recorded. The only frontier that Xi had not tamed fully till now was the Chinese private sector and the billionaires it spawned. But their time, he may have decided, has come.

The crackdown started with the Alibaba-promoted Ant Group. Ant is a spectacular company. In just six years, it became the highest-valued financial technology firm in the world, the planet’s largest money market fund, and in 2020, processed more payment transactions ($17.6 trillion) than Mastercard and Visa combined. Within China, Alibaba’s founder Jack Ma was a folk hero. Ant planned history’s largest ever share issue, worth $34.4 billion, in November 2020, to be listed on the Shanghai and Hong Kong stock exchanges.

In September, Beijing issued stringent guidelines that would in effect regulate Ant more like a bank than a fintech company. Ma was enraged. Speaking at a conference, he called the Chinese financial establishment a “club for the elderly", accused the big banks of having a “pawnshop mentality" and said: “We cannot regulate the future with yesterday’s means."

The die was cast. Ma and his top executives were called in for what Communist jargon refers to as ‘re-education’. Days before the Ant share issue was to open, the government cancelled it.

In all fairness, Beijing may have had enough economic reasons to do so. Ant’s gigantic consumer credit business, through a three-minute automated process, had approved loans for millions of borrowers, most of whom would possibly have had their loan applications rejected by a standard bank, and got banks to disburse these loans, charging a management fee of around 2.8%. Ant had no skin in the game—it collected its fees, while the banks took on all the credit risk. This could have led to a bubble, whose bursting would have plunged China’s banking sector into a crisis.

The Ant offering had been oversubscribed 870 times—with $2.8 trillion of orders just from retail investors in China. Had Ant listed on stock exchanges, its price could have nosedived, now that it had to obey strict banking regulations and would be treated as a bank stock, not a tech star. Banks typically attract much lower valuations than tech firms just about everywhere.

There could be a China-US angle here. US regulators have been threatening to delist Chinese companies from US stock markets for refusing to comply with auditing and disclosure rules mandatory for all US-listed companies. There are reports that Didi and the other two firms being investigated for ‘national security issues’ were asked by Beijing to list in Hong Kong instead of the US. The Ant initial public offer (IPO) was hyped as “the crowning glory of China’s home-grown financial technology" and its listing in Shanghai and Hong Kong was intended to tell the world that China no longer needed US capital markets. But a post-IPO tanking of the Ant share would have been embarrassing.

Beijing may have been compelled to act, although it may not have gone straight for the kill if it did not also want to show Ma his place. A big head needed to roll to make the power hierarchy clear to China’s billionaires. “North, south, east, west, and centre, the Party is leader of all," Xi has announced.

On 10 July, CCP mouthpiece Global Times reported “a sweeping set of draft rules for cybersecurity reviews over domestic internet companies that seek overseas listings… Businesses holding information of more than a million users in China must undergo a regulatory review before applying for an overseas IPO… (This is) another crucial step in China’s efforts to ensure data security amid growing risks from the US as it continues to crack down on Chinese firms." The ‘national security’ investigations of Didi and the two other companies could be a warning. Firms planning a New York IPO will now need government permission, preceded by tough scrutiny.

The recent moves may serve another key aim: Total control of the data lying with these firms. Hardliners already demand full nationalization of data. The logic is that tech giants owe much to government support, from loan write-offs to banning Western competition. The payback for this kindness, they argue, should be the data the firms collect.

China may be on the verge of a new financial system with Xi Jinping characteristics. Jack Ma, meanwhile, is said to be spending his time painting. A business partner has told CNBC that his creations are “pretty good".

Sandipan Deb is a former editor of ‘Financial Express’, and founder-editor of ‘Open’ and ‘Swarajya’ magazines

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