Ep. 36: China Tech is Risky Business - Pinduoduo’s Hack and DJI’s Corruption Scandal

In episode 36 of TechBuzz China, co-hosts Ying-Ying Lu and Rui Ma talk about the dirty, risky, and more unseemly aspects of China tech, primarily focused on two stories that grabbed headlines recently: the “hack” at the ecommerce company Pinduoduo, and the corruption scandal at the drone designer DJI. Although the incidents differ greatly from each other, they have come on each other’s heels, so our co-hosts decided to bundle them together for an episode, reflecting what’s buzzing within the tech community in China right now. Rui and Ying-Ying begin by focusing on the Pinduoduo story. This past week, the company lost millions of dollars to hackers who obtained millions of $15 coupons and sold them for as little as $0.06. At one point, it was rumored that the platform lost over $3 billion in just a few hours, and users wondered if the company would go bankrupt. Pinduoduo has denied these rumors and insists that actual losses will be less than $1.5 million. However, what exactly happened? How did Pinduoduo decide to handle the issue, and what were the ramifications of these actions? How extensive was the damage to both the company and its stock price? Next, our co-hosts shift their attention to a scandal that has rocked Chinese tech this week: the unearthing of over $150 million in losses due to internal corruption at the leading drone maker, DJI. Incredibly, the “chain of corruption” was unearthed by accident while the company was upgrading its management process late last year. One by one, Rui and Ying-Ying list and review the methods by which employees colluded and completed their dirty deeds. They share how DJI handled the situation: very publicly, by sending out a letter to its 14,000 staff members around the world. Why did it take this approach? Listen to find out: How unusual — or not — are these two stories in the landscape of China tech? How are businesses getting scammed by China’s “black-gray” industry, in which people are committing fraud on a massive scale? How was it that DJI, a decacorn known for its world-class quality, with anti-corruption systems in place, was able to be brought to its knees by a group of criminal employees? Are there more scandals these days…or is there simply more transparency around events when they do get reported or disclosed? What are some of the other high-profile cases that have come up recently? As an investor or entrepreneur in China, what do you need to know about these risks? As always, you can find these stories and more at pandaily.com. Do let us know what you think of the show by leaving us an iTunes review, liking our Facebook page, and tweeting at us at @techbuzzchina to win some swag! Thanks also to our listeners over at our partner, dealstreetasia.com.  

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