China's cabinet on Tuesday said it would crack down on overseas share-listings by its companies, just two days after the country's Cyberspace Administration removed the Didi ride-hailing app from Chinese stores following its U.S.$4.4 billion initial public offering (IPO) in New York.
The removal of the app wiped billions from the value of Didi Global Inc shares on Tuesday in the first trading session since the app's removal on Sunday.
Didi -- which runs an Uber-like service with around 500 million users and 15 million drivers -- went ahead with the listing despite being urged by Chinese regulators to delay the IPO, according to a report in the Wall Street Journal (WSJ) on Monday.
Officials were "wary of the ride-hailing company's troves of data potentially falling into foreign hands" owing to public disclosure around the listing, the WSJ quoted sources as saying.
Didi was investigated by the Cyberspace Administration, and investigations are ongoing into other U.S.-listed Chinese companies including Full Truck Alliance and Kanzhun.
"After investigation and verification, the Didi app has been found to be in serious violation of laws and regulations on the collection and use of personal data," the administration said in a statement on its website.
"[The administration] has notified app stores to remove the Didi app and ... required Didi to take serious measures to rectify existing problems," it said.
Meanwhile, the State Council said it would be "revising the regulations on strengthening the confidentiality and file management related to the issuance and listing of securities overseas."
"Effective measures will be taken to deal with risks and emergencies of Chinese concept stock companies, and to promote the construction of relevant regulatory systems," it said in a statement on its website.
The government will also take steps to apply its Securities Law overseas, the statement said.
Internet commentator Zhang Ning said U.S. listings are hugely popular among Chinese companies, as local markets have been lackluster.
"We have seen indexes fall from around 6,000 points about a decade ago to just over 2,000 points today," Zhang said. "They are listing in the U.S. because the markets there are doing relatively well."
But transportation industry analyst Wang Lun said the timing of the Cyberspace Administration's action was strange.
"When this happened, my first reaction was that they had angered the ruling Chinese Communist Party (CCP) leadership with their listing in the U.S.," Wang said.
"In the current [political] climate, companies taking their listings to the U.S. is a loss of face for Beijing," he said, citing similar accusations leveled at other U.S.-listed companies.
The app's removal came after Didi vice president Li Min said on July 4 that there was no possibility of Didi's data reaching the U.S., as it is all stored on Chinese servers.
Reported by Qiao Long and Chingman for RFA's Mandarin and Cantonese Services. Translated and edited by Luisetta Mudie.