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2019-07-16 07:57:23

Chinese authorities have blocked tech companies JD.com Inc. and Meituan-Dianping from making their own high-precision maps, hindering their ambitions to develop delivery robots.

Regulators took issue with the fact that the companies’ complex ownership structures — in which they are legally registered outside the mainland — bring them into conflict with rules that forbid China-based mapping servers from sharing data with those overseas, according to financial news outlet Caixin.

Both companies use the so-called variable interest entity (VIE) structure widely employed by Chinese companies listed outside the mainland to skirt rigid financial rules that limit overseas investment and ownership in some sectors, especially the internet business. Under the structure, a company that is registered overseas is set up to list on bourses outside the Chinese mainland and uses contracts to control mainland-based units that hold most of their valuable assets — including licenses.

In the cases of New York-listed JD.com and Hong Kong-listed Meituan, it is not the VIE structure itself that is problematic, but the rules regarding data sharing, Caixin reported. Regulators at the Ministry of Natural Resources who made the decision found that the way the two companies were set up overseas bound them to share data with companies outside the mainland, according to a source close to the matter who asked not to be identified due to its sensitivity.

While the ministry proposed relaxing some aspects of its mapping qualification regulation in draft changes released in May, limits regarding data-sharing would remain in place under this draft. The decision could frustrate the companies’ efforts to build a fleet of autonomous delivery robots, which would rely heavily on high-precision maps.

Meituan, one of China’s two largest food-delivery companies, unveiled a prototype for a self-driving delivery robot last year that was touted as the destined replacement for the company’s delivery personnel. JD.com, China’s second-largest e-commerce company, has launched similar self-driving delivery robot prototypes.

China has granted licenses to more than 10 companies for the development of high-precision maps, but only five of those have successfully launched digital mapping services. These include internet search giant Baidu Inc. and Alibaba-owned mapping unit AutoNavi. While Baidu and Alibaba both use VIE structures, theirs are not thought to contain provisions that breach the mapping regulation.

The latest license was issued for Huawei Technologies Co. Ltd., which won approval earlier this month to enter the high-precision map business through its unit Beijing Huawei Digital Technologies Co. Ltd.

This is an original article written by An Limin and Mo Yelin of Caixin Global and has been republished with permission. The article can be found on Caixin’s website here.

(Header image: PhotoAlto Agency/VCG)