As ride-hailing giant Didi Chuxing faces a regulatory crackdown in China following its US listing on June 30, some investors see opportunities in the government’s fresh efforts to tighten cybersecurity in the country.
The Cyberspace Administration of China has ordered the removal of Didi from app stores, accusing it of illegally collecting users’ personal data. Regulators have also opened a cybersecurity review of the company.
China’s cybersecurity sector is underdeveloped. As of 2020, it had a market size of about 74.9 billion yuan (US$11.6 billion), according to the China Centre for Information Industry Development (CCID), a government-backed think tank. On the other hand, the global cybersecurity market was valued at US$167.13 billion in 2020, according to Grand View Research, an India and US-based market research and consulting company.
The regulatory crackdown on Didi, which also involves a probe into the company’s alleged antitrust violations, was followed by parallel actions to ramp up cybersecurity at the local government level. Shanghai regulators, for example, have announced that investment in cybersecurity by regulatory bodies and public affairs institutions should be more than 10% of its overall investment.
This reflects China’s sharpening focus on cybersecurity, which in turn opens up investment and growth opportunities in the sector. During the past week, several tech companies have reported a rise in investor inquiries about cybersecurity investments.
According to market analysis, cybersecurity is focused on two major areas. One is network border protection which refers to technologies such as virtual private network (VPN) and firewall. The other is the security of IT systems and the content stored in the systems. Companies that can provide all-around cybersecurity solutions are expected to lead the market growth.
Amid the regulatory focus on the sector, China’s cybersecurity market is expected to expand to nearly 100 billion yuan by the end 2021 and to 250 billion yuan by 2023, according to CCID.