China's powerful internet regulator flexes muscles with Didi probe

BEIJING (Reuters) – China’s internet watchdog, which stunned investors with an investigation into Didi Global two days after the ride-hailing giant’s New York stock market debut, has come to the forefront of Beijing’s sweeping efforts to rein in its tech sector and enforce tightening data security efforts.

The Cyberspace Administration of China (CAC), set up in its current format in 2014 by President Xi Jinping, implements online censorship that has tightened dramatically under his tenure. The agency champions Beijing’s policy of “internet sovereignty” that keeps China’s massive online ecosystem behind the country’s Great Firewall.

Its move against Didi and two other firms that recently went public in the United States was swiftly followed by Beijing’s announcement that it will clamp down on overseas-traded Chinese firms – many of them U.S.-listed tech companies – including tightening regulation of cross-border data flows and security.

Rogier Creemers, an assistant professor of Chinese studies at Leiden University in the Netherlands, said that in China, as elsewhere, there is growing wariness over the power and influence of big tech.

“So we are at a point where the stars are aligned for action to be taken against these companies, and then it all happens nearly at once from all these different angles,” he said, referring to measures by various regulatory bodies.

The CAC’s move follows high-profile investigations and penalties meted out against “platform economy” companies since late last year by different regulators, in particular the country’s increasingly active competition watchdog, the State Administration for Market Regulation.

The CAC, Creemers said, is asserting its cybersecurity mandate.

“Is this about turf or substance? It’s about both,” he said.

The CAC did not immediately respond to a request for comment.

Accusing Didi of illegally collecting users’ personal data, the CAC called for Didi to stop accepting new users in China, saying Didi’s app “has serious violations of laws and regulations pertaining to the collection of personal information”.

Asked about the CAC’s recent action, foreign ministry spokesman Wang Wenbin said authorities manage and make safety checks on internet platforms to mitigate risk and safeguard national security.

“China’s policy remains unchanged. We continue to open up and support the development of internet platforms and we will continue to encourage Chinese companies to engage in international exchanges and cooperation,” he said.

POWERFUL AND BUSY

With frequent regulatory actions and warnings, the CAC looms large over China’s sprawling internet.

Its public WeChat account includes descriptions of events and speeches, announcements of enforcement actions and, like those of other party and state organs, propaganda extolling the virtues of Xi and the ruling Communist Party.

This week, WeChat deleted dozens of LGBT accounts run by university students, saying some had broken rules, a move that followed a CAC pledge to clean up the internet to protect minors and crack down on social media groups deemed a “bad influence”.

In April, the agency launched a hotline to report online comments that defame the Communist Party and its history, vowing to crack down on “historical nihilists” – those propagating information that undermines sanctioned narratives – ahead of the party’s 100th anniversary on July 1.

In more run-of-the-mill measures, it joined in April with other regulators in publishing guidelines dictating how apps must protect user privacy and personal information. In January it canvassed public opinion to update old rules covering online payments, shopping and livestreaming platforms.

In 2019, Reuters reported here that financial information provider Refinitiv, the news service’s biggest customer, blocked politically sensitive Reuters stories from its financial customers in China, under threat from the CAC of having its service shut down.

The CAC has also in recent years overseen the removal of tens of thousands of news, social media and gaming apps from Apple’s China app store and other local services.

COLOURFUL HISTORY

The CAC’s early years were defined by its swaggering boss, Lu Wei, who oversaw the creation of China’s annual World Internet Conference, which has attracted such global tech titans as Apple’s Tim Cook and Google chief Sundar Pichai to the eastern tourist town of Wuzhen.

The inaugural 2014 event drew pushback from foreign tech firms when organizers sought agreement on a last-minute declaration on “internet sovereignty”. Industry representatives ultimately declined to sign the pledge.

Lu famously traveled to Silicon Valley that year, where he was greeted at Facebook headquarters in Mandarin by founder Mark Zuckerberg. Facebook, like most big foreign social media and news sites, was then and remains blocked by the Great Firewall.

Lu, who abruptly stepped down in 2016, was expelled from the Communist Party in 2018 and jailed in 2019 for 14 years for taking bribes worth nearly $5 million, one of the most senior officials caught up in Xi’s sweeping anti-graft campaign.

The CAC has since 2018 been headed by Zhuang Rongwen, a vice minister in China’s central propaganda department. He attends the Wuzhen internet conference but, like most senior Chinese bureaucrats, tends to avoid the spotlight.

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