The city of Beijing appears to have Didi under state control, Bloomberg News reports

September 3 (Reuters) – Beijing City is considering taking Didi Global (DIDI.N) under state control and has proposed that government companies invest in the Chinese travel company, Bloomberg News reports.

The central goal of the Beijing city government’s proposal is to regain control of one of its largest corporations, and in particular the data it holds, according to Friday’s Bloomberg report.

Chinese authorities have intensified their regulation of technology companies in the past year in an effort to improve market competition, data processing and employee processing.

According to the preliminary proposal, some Beijing-based companies, including the Shouqi Group, which is part of the state-owned Beijing Tourism Group, would acquire a stake in Didi, Bloomberg reported, citing unidentified people familiar with the matter.

Other scenarios being considered include the consortium having a nominal stake accompanied by so-called “golden action” with veto power and a seat on the council, he added.

Didi, the Beijing city government, Beijing Tourism Group and Shouqi Group did not immediately respond to Reuters’ requests for comment.

Didi shares rose 6% to $ 9.34 at 1440 GMT.

The Wall Street Journal reported in July that Didi was considering moving to privacy to allay China’s data security concerns and offset investor losses since it appears in the United States. This was later denied by Didi. Read more

“We were expecting some action but not at this level of magnitude. The big question is what will happen to Didi’s investors?” Said Justin Tang, head of Asian research at investment adviser United First Partners in Singapore.

“This measure is as hasty as the regulation on education companies. With all the concessions recently given by Chinese technology companies, we thought there would be some green shoots, but this is an unexpected move.”

Others said stock market investors seemed to welcome the informed proposal.

“A better outcome than making a mistake like private education,” said Dave Wang, Nuvest Capital’s portfolio strategist in Singapore.

The “golden share” deal considered by Didi would be similar to an investment the Chinese government has made in the key Chinese entity of TikTok owner ByteDance, Bloomberg said.

Corporate records showed that the Chinese government has 1% stake in ByteDance and Sina Weibo (WB.O) units. Read more

The Shouqi group owns the vehicle reception service, Shouqi Yueche and Bloomberg said it would play a role in helping operate its biggest rival according to the proposal.

Didi is facing a cybersecurity investigation by Chinese authorities after his first public offering in New York in June. Read more

Reuters reported in August, citing people familiar with the matter, that Didi is in talks with state information security firm Westone (002268.SZ) to manage its data management and control activities. Read more

Didi is controlled by the management team of co-founder Will Cheng and President Jean Liu. SoftBank Group Corp. (9984.T), Uber Technologies Inc. (UBER.N) and Alibaba (9988.HK) are among other investors in the company. Read more

Reports of Chavi Mehta in Bengaluru, Yilei Sun in Beijing, Brenda Goh in Shanghai, Anshuman Daga in Hong Kong and Tom Westbrook in Singapore; Edited by Saumyadeb Chakrabarty and Alexander Smith

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