China's premier cab-hiring service, Didi Chuxing, recently took over Uber China. Uber is the world leader in the ride-hailing market, which it created. But it admitted defeat on the Mainland when it sold its Chinese subsidiary in a stock swap. Uber accepted 17.7 per cent stake in Didi (with 5.9 per cent voting rights) and gave Didi a seat on Uber's board. Didi, which also owns a stake in India's Ola, is now a Mainland monopoly, controlling over 90 per cent of the Chinese ride-market. This is the umpteenth instance of a global tech giant failing to make inroads in the world's largest market. The 800 million smartphone users in the People's Republic are very comfortable with multitasking, using mobiles for communication, social media, Internet surfing, trading, banking and business transactions.
Yet, due to the combination of opaque regulatory structures, and stiff local competition, the global marquee names have not been able to exploit that huge market. Amazon trails Alibaba. Google is third in terms of search engine popularity behind locals, Baidu and Soso (a search engine owned by tencent). Facebook, YouTube and Twitter are banned on the Mainland where local networks like Weibo and Renren hold sway. Instant messaging services such as WhatsApp have been outmanoeuvred by WeChat. Outsiders attribute their difficulties to protectionist attitudes and paranoid censorship norms. Google spent several years out of China, because it was unwilling to comply with censorship. Facebook and Twitter are banned because their servers are outside the "Great Firewall". Uber China could not find a way around a recent diktat that banned subsidising cab-rides (by offering bonuses to drivers). Software product companies have also complained of widespread piracy and violation of IPR. Certainly locals find it easier to navigate the labyrinth of Chinese bureaucracy.
But it is unfair to write off Chinese tech businesses as cosseted and ring-fenced by protectionist norms. The Chinese market is characterised by ferocious internal competition and many Chinese tech companies have features that exceed anything available outside that market. The excellent physical infrastructure allows its social media sites to carry high-speed mobile broadband video and support free video calling (which is now the Mainland norm rather than paid vanilla voice calls). Another strong feature is that Chinese majors have inbuilt payment and micro-payment options. Chinese consumers can use WeChat's mobile wallet (linked to bank accounts and/or credit cards) instead of paper or plastic. Indeed, WeChat's 600 million users prefer to use its system and WeChat is accepted by practically every Chinese business. One of Uber's problems was its inability to work out a deal with WeChat, which blocked Uber China. Weibo - the Twitter equivalent - also has a payment system in conjunction with AliPay, which is the payment and financing system of Alibaba.
It's no surprise that Chinese majors are looking to expand abroad. Language is one barrier but the big players already have, or are rapidly putting together, English language portals. This is only one visible aspect of China's growing soft power. It must not be forgotten that China now has 30 universities ranked in the QS World University Rankings and it is the world leader in supercomputing. China already dominates world trade in physical goods, (including high end smartphones and electronic equipment). The world may now be entering a new phase where China's tech giants take on Silicon Valley.
