China Enshrines Ride-Hailing Curbs in Another Blow to Didi
(Bloomberg) -- China issued its most comprehensive set of guidelines yet governing the growth and expansion of its ride-hailing industry, dealing a fresh blow to leader Didi Global Inc.
Agencies including the antitrust watchdog, transport ministry and public security bureau issued a formal package of rules Tuesday aimed at protecting the rights of the millions of ride-hailing drivers that underpin the sector's growth. They ordered Didi and its smaller rivals to strengthen social insurance for drivers while adopting “reasonable” commissions. And they warned them against using data to take advantage of consumers. China will establish local-level supervisory offices staffed by personnel from multiple agencies before the year's end, according to the guidelines.
The latest edicts enshrine and collate previous declarations, while offering an overarching guide for Didi as it grapples with regulatory scrutiny. Beijing has ordered the internet giant to delist from the U.S., while weighing punishments for a once-feted national champion that plowed ahead with a June IPO over official objections, Bloomberg News has reported. Several agencies have dispatched officials to investigate the company and are considering an unprecedented package of punishments, including a state-directed takeover, Bloomberg News reported in September.
Tuesday's guidelines muddy the waters further. Beijing has made it a priority to protect the millions of mostly contract workers that power the gig economy, often without full employee benefits. The country's agencies are responding to Xi Jinping's “common prosperity” goal of getting rich and powerful corporations to share the wealth, in part to ensure social stability.
Read more: China Said to Ask Didi to Delist From U.S. on Security Fears
What Bloomberg Intelligence Says
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.
- Matthew Kanterman and Tiffany Tam, analysts
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©2021 Bloomberg L.P.
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