China fined Didi Global Inc. more than 8 billion yuan ($1.2 billion), wrapping up a year-long probe into the ride-hailing giant that’s come to symbolize Beijing’s bruising campaign to rein in its powerful internet industry.


Regulators also fined Didi Chairman Cheng Wei and President Jean Liu 1 million yuan apiece, the Cyberspace Administration of China said in a statement. Didi was found to have violated three laws, and those illegal operations threatened national security, the internet overseer said.


The long-awaited decision on Didi — which pushed ahead with a $4.4 billion U.S. initial public offering in June 2021 against Beijing’s wishes — removes some of the uncertainty that at one point wiped more than 80% off its market value. The announcement signals that the worst may have passed for the company. It also reinforces expectations that Beijing is easing up on the massive tech sector just as its economy sags under the weight of Covid restrictions and global inflation. Didi’s main apps are now expected to reappear on China’s mobile stores, allowing the ride-hailing giant to again sign up new users and pursue growth.


“Our investigation discovered that Didi’s actions on data management severely affected national security. It also neglected to comply with our specific demands and avoided oversight, among other infractions,” the agency wrote in its statement, employing a Chinese saying to accuse Didi of “promising one thing but doing the opposite.”


The penalties fell short of the worst fears of some industry observers, who had expected executives or the company to draw harsher punishment. Didi was one of the companies at the heart of a clampdown on the internet industry that Beijing initiated in 2020, when it halted Ant Group Co.’s IPO. The ferocity with which regulators cracked down on Didi — including forcing it to delist months after a highly touted IPO — mean investors may be hesitant to declare an end to the industry’s travails.


Chinese tech shares extended gains in Hong Kong in the afternoon. The Hang Seng Tech Index climbed more than 1% as Alibaba Group Holding Ltd. and Tencent Holdings Ltd., the two biggest firms, recouped some of their earlier losses.


“The government’s disregard for investors’ capital in its punishment of Didi and the huge value destruction caused by the probe are not things that will be easily forgotten,” said Vey-Sern Ling, managing director at Union Bancaire Privee in Singapore. “The closure of the probe may bring some relief but it remains to be seen if Didi’s business can eventually recover.”


Didi said in a statement it will “accept and obey” the regulators’ decision while working with the agency to complete “rectification.”


Sentiment toward China’s internet industry has been volatile this year. Investors have seized on a pledge from economic czar Liu He to support the digital economy as a signal the crackdown is easing, or perhaps even drawing to a close. It remains unclear under what conditions Chinese regulators would allow Didi to resume work on a listing. The company now trades on the pink-sheets market reserved for higher-risk securities.


“As Didi eventually heads towards another listing, this time perhaps in Hong Kong, you can’t fault investors for being skeptical,” Ling said. “Once bitten, twice shy.”


Didi, once feted as the national champion that drove Uber Technologies Inc. out of China, has since come to encapsulate the extent to which Beijing is willing to go to curb the power and influence of its most successful internet corporations.


Didi’s ordeal began in July 2021 — days after its New York debut. China’s cybersecurity watchdog accused the company of violating data rules and ordered more than two dozen of its apps, including those for riders and drivers, suspended from download and new user registration. Didi, forced to delist from US bourses during the investigation, is expected to prepare for a Hong Kong listing.


“The wrap-up of the Didi investigation should give tech companies a better understanding of where the red line is,” said Willer Chen, an analyst with Forsyth Barr Asia in Hong Kong. “This is uplifting news for the Chinese tech industry, but no one can be certain that the worst is behind us.”

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