What the end of Didi’s cybersecurity probe means for China tech investors

What happened?

Chinese regulators are getting ready to conclude investigations into Didi and restore its mobile app as soon as this week, based on reports by the Wall Street Journal. 

Didi’s share price surged by about 50% in pre-market trading in the US, as investors cheered the news. 

The KraneShares CSI China Internet ETF (KWEB) also rose by more than 6% in the pre-market. 

What does this mean?

The conclusion of investigations into Didi would provide some light at the end of the tunnel for the ride-hailing company. 

Didi has been at the centre of a broader crackdown on Chinese tech companies by the regulator. 

Shortly after its initial public offering (IPO) in the US in June last year, Chinese regulators said that an investigation had discovered problems with the way it collects and uses personal information.

Thereafter, Didi’s app was removed from Chinese app stores. This led to a more than 10% decline in its revenue in 3Q21 compared to the previous year. 

Why should we care?

Investors view the move as a positive sign for the Chinese tech sector, as it appears that regulators are following through on their commitment to end a multi-year crackdown. 

Earlier in March, China’s Vice Premier Liu He said that the Chinese government would roll out support for the economy and keep markets stable. 

The message was further reinforced last month, when Premier Li Keqiang voiced support for the country’s tech support to get listed.

It’s nice to have all these words of support, but investors were waiting for actual action taken to help the tech companies. 

Now that the first light at the tunnel has come through, we will be looking out for any further support measures that might come through.