China's cybersecurity authority proposed Didi Global Inc and two other US-listed tech companies consider Hong Kong listings, while the current investigation is at its closing stage, said a recent report.

According to The Wall Street Journal, some people familiar with the matter claimed that in recent meetings with executives from Chinese ride-hailing giant Didi, logistics platform Full Truck Alliance Co and online recruitment firm Kanzhun Ltd, the Cyberspace Administration of China (CAC) raised the possibility.

The three companies were being probed by the CAC as part of a crackdown on China’s IT companies in the face of stricter data security regulations. According to WSJ, Full Truck is already looking at Hong Kong IPO, which could come as soon as next year.

Didi's share price has fallen over 40 per cent since its IPO in June, increasing investors concern about Beijing’s interference in the Chinese economy and stock market. However, following the WSJ report, the stock rallied nearly 14 per cent on 21 October.

A Hong Kong listing would ensure that a possible delisting from American markets – whether imposed by the Chinese government or voluntary – would present fewer issues for the United States or other investors looking to trade shares.

According to reports, China is mulling new legislation to restrict domestic enterprises with big volumes of customer data from going public on global stock exchanges.

Chinese Regulators

The Chinese government's investigation targeting Didi has affected the company soon after it made its debut on the New York stock exchange.

The investigation's stated goal was to effectively eliminate "potential national security risks relating to procurement, data processing and overseas listings”, reported South China Morning Post.

In terms of Didi, in particular, it was reported that the investigation was launched because Didi "forced its way" into a US listing despite regulatory objections.

The CAC then stated in a brief statement that Didi's app, which is widely referred to as China's Uber, had breached the country's rules and regulations by improperly collecting and using user information.

In July, China's cyber watchdog initiated investigations into Full Truck Alliance. While announcing the investigation, the CAC said its Cybersecurity Review Office will conduct the probe to “guard against” national security and data security risks.

The other Chinese company Kanzhun held its first IPO on or around 11 June, issuing 48 million American Depositary Shares ("ADSs") at $19.00 per ADS.

Later the company published a news release titled "Kanzhun Limited Announces Cybersecurity Review in China" on 5 July 2021.

According to the news release, "pursuant to the announcement posted by the CAC on 5 July the Company is subject to cybersecurity review by the authority. During the review period, [Kanzhun's] 'BOSS Zhipin' app is required to suspend new user registration in China to facilitate the process."

At that time, investment research provider TS Lombard's China economist Rory Green said: "Crackdown on Didi opens a new front in China's tech assertiveness: this is now a question of sovereignty.”

In August, China passed a major data protection law, setting out stricter rules on how all these tech companies collect and handle the information gathered from their users.

The Personal Information Protection Law (PIPL)—which will take effect on 1 November—establishes a complete set of standards for data collection, processing and protection, which were previously governed by fragmented law. Authorities also stated that companies that break the guidelines may face penalties.