Why did Xi Jinping punish Didi, after the biggest IPO 2021? - YouTube

On Jun 30th, China's largest rideshare app Didi was listed on the New York stock exchange,

becoming the second-largest Chinese IPO since Alibaba.

However, within 5 days, China's Cyberspace Administration announced the launch of a "cybersecurity

review" of Didi, and ordered all app stores to pull the app, alleging that Didi had "illegally

collected users' personal data."

Shares of Didi fell, wiping out a quarter of total market value and taking the stock

below the IPO price.

Some experts say that the Chinese communist party is politicizing its war with America

in the capital market.

Others say it's tightening the grip on data and Chinese big techs.

Why does the Chinese regime punish one of its own tech companies in the American stock

market?

Hello, welcome to my show.

I'm Lei.

Despite deteriorating Sino-US relations, a record 34 Chinese companies have raised $12.4

billion dollars in New York during the first half of 2021.

This is a huge increase compared with the 18 companies and $2.8 billion during the same

period last year.

The surge has delivered $460 million in fees for Goldman Sachs and Morgan Stanley.

However, more than two-thirds of Chinese companies listed in the US markets this year have sunk

below their IPO price, causing losses to investors.

A US law firm is filing class-action lawsuits against Didi on behalf of investors and demanding

compensation for losses.

Didi’s drama isn't about data security or antitrust.

It's not about competition with America, either.

Didi's trouble with the CCP is fated in the system of Chinese state capitalism.

As various CCP factions clash over power and control, this infighting has now spilled over

to the American capital market.

I'm making a series of videos on this topic.

Let’s first look at what Didi is.

When Didi was launched in 2012, Uber was already a leader in the global carpool industry.

Didi's strategy was to aggressively cut prices and offer lucrative subsidies to drivers and

passengers.

Its goal was NOT to make money but to dominate the market quickly.

The company’s annual subsidies exceeded 20 billion yuan at its peak.

Meanwhile, Uber lost over $1 billion dollars every year during its bruising battle with

Didi in China.

For 8 consecutive years till 2020, Didi lost a total of 60 billion yuan or close to $10

billion dollars since its establishment.

It turned profitable in the first quarter of 2021 and immediately went for an IPO in

the United States.

The major Chinese financial portal Caixin.com commented that Didi's financial data released

in its IPO prospectus is "a game of whitewashing reports" because "the calculation method has

a lot of room for judgment."

For example, the year-over-year quarterly revenue increase of 100% was compared to the

worse quarter during the pandemic as a benchmark.

In addition to losing money, Didi has been under antitrust investigation by the regime

since as early as 2016.

Right after Didi announced acquiring Uber China in August 2016, the Ministry of Commerce

stated at a press conference that Didi had not reported the acquisition, and that the

ministry was conducting investigations per the Anti-Monopoly Law.

In the following years, officials have made noise about investigating Didi.

In 2018, for example, Wang Fumin, deputy director of the Guangdong transportation Department,

complained on-record to about Didi's monopoly and refusal to submit its data.

It's rare that a government official complains about a private enterprise.

In communist China, they usually don't complain; they order you to change or else they shut

you down.

In 2019, the Chinese Supreme Court even streamed a live trial of a case against Didi for market

monopoly.

This public trial seemed unusual.

But eventually the noise quieted down.

We can see that the regime authorities have been trying to go after Didi for 4 years.

But they haven’t made a dent.

Didi has been successfully dodging the bullet all this time.

That makes us wonder:

According to "CVS Investment Data," nearly 20 state-owned enterprises have invested in

"Didi."

This includes the national giants: Bank of Communications, China Merchants Bank, Poly

Capital, China Life, CICC Alpha, CITIC Capital, and Ping An Insurance.

These state-owned financial institutions provided enormous capital to help Didi stay afloat

while fighting Uber.

From May 2015 to 2016, before Uber ceded, Didi raised over $8 billion in capital, while

Uber China raised only $1 billion.

The battle between Didi and Uber was between an American private company and a Chinese

company supported by the communist state.

It's a fight between their investors and their pocket books.

Uber couldn't win the battle with an opponent that doesn't care about losing money.

In addition to state-owned financial institutes, Didi received investments from private equity

heavyweights: Boyu Capital, Sequoia Capital, Hillhouse Capital, and Primavera Capital.

Other notable shareholders are Alibaba, Tencent, and Ant Group.

Well-known international shareholders include Japan's soft Bank, which is Didi's biggest

shareholder, American company Apple, Taiwan's Foxconn Group, and Singapore’s Temasek.

Didi also has ties with the Chinese military.

The company’s president, 柳青Liu Qing, is the daughter of the founder of Lenovo,

柳傳志Liu Chuanzhi.

Lenovo Group is a computer giant with strong ties to the military.

And China's military industry giant, Poly Group, invested more than $400 million dollars

in Didi.

So, Didi is backed by a powerful alliance of both Chinese and international finance

heavyweights.

And each of the Chinese giants is controlled by one or more powerful princelings and their

red families.

Now you understand why Didi could easily "kill" more than 30 competitors, including Uber,

in just 4 years.

And why it was able to fight off the authorities’ regulatory probe for the past four years.

Most importantly, these princelings and red families might not be on the same side as

Xi Jinping.

In fact, Didi is so powerful that it's able to fight off something that even Jack Ma wasn't

able to.

After derailing the planned IPO of Jack Ma's Ant Group and an antitrust probe, Xi Jinping’s

officials fined Jack's Alibaba a record $2.8 billion dollars.

But the powerful Didi didn't want to put up with that.

When Xi Jinping's officials advised delaying IPO in the US, Didi and its backers ignored

it and went forward anyway.

It became obvious that Xi’s "antitrust investigation” wasn’t enough to intimidate or strike down

Didi.

The authority had to use a more powerful weapon.

So, the charge of a "data and national security violation" was brought in.

And it caused damage.

This time, Didi was hit.

So you may ask why Xi Jinping is fighting Didi and its backers in the first place?

That's a very good question.

Because infighting and factional struggles among the communist leaders are their way

of life and have existed from day one.

This is the nature of all communist organizations.

If communist leaders don't feel threatened by their people and don’t fight with each

other, they wouldn't be communists.

However, it is very difficult for Wall Street to interpret the political infighting.

Unless you've lived in communist China long enough and follow Chinese politics closely,

it's difficult to fathom their actions.

Chinese may understand it but don't want to talk about it.

That's why following my channel and other channels like this one is critically important

if you deal with China and Chinese investments.

I'm running out of time today, but in my next video, I’ll talk about the CCP’s political

infighting and how that’s impacted Didi, as well as what it means to us.

Stay tuned!

See you next time!