By Clay Chandler
December 23, 2017

Good morning. I am in Utah for the holidays and mourning the dearth of snow. In between dodging rocks and ice on the slopes, I’ve been pondering changes in China’s tech scene this past year. To me, the biggest development is clear: 2017 was the year Chinese tech companies finally went global.

Way back in 2003, as Alibaba battled eBay for control of China’s online shopping market, Jack Ma predicted that in their home market, Chinese startups like his would inevitably triumph over Barbarian invaders, no matter how deep the foreign firms’ pockets or how sophisticated their technology. EBay, he famously proclaimed, may be a “shark in the ocean,” but Alibaba was a “crocodile in the Yangtze River.” As Ma put it: “If we fight in the ocean, we lose—but if we fight in the river, we win.”

That prophecy proved prescient. Alibaba’s online platform Taobao vanquished eBay’s China subsidiary, Eachnet. In the decade that followed, Silicon Valley giants like Google, Facebook, Amazon were held to a token Chinese presence. In summer of 2016, Uber, despite declaring China its “number one priority” and spending billions of dollars trying to secure a foothold there, surrendered to Chinese rival Didi Chuxing. Early this year, Netflix settled for a “modest” content sharing arrangement with local Internet company iQiyi. And until recently, the other half of Ma’s prediction was also true: China’s tech giants were mostly domestic creatures, with no real presence overseas.

No more. China’s crocodiles are evolving fast. They’re learning to swim in saltwater, and proving themselves formidable ocean predators. Over the past two years, China’s largest tech firms have made a slew of major investments in India and Southeast Asia, and bankrolled ambitious bike-sharing ventures in the U.S., Europe and Japan. This week brought the clearest demonstration yet of Chinese tech firms’ global ambitions as Didi Chuxing raised $4 billion in new venture funding and signaled its interest in acquiring control of the largest taxi-on-demand service in Brazil.

Didi’s latest cash infusion, received from investors including Japan’s SoftBank Group and Mubadala, an Abu Dhabi state fund, follows a $5.5 billion fund-raising round in April, also led by Softbank. All told, Didi’s valuation is said to have swelled to $56 billion. That would make Didi the second-most valuable startup in the world after Uber, which was valued at $68 billion after its latest funding round in June 2016. But a current Softbank offer to purchase a large chunk of Uber at a discount would lower Uber’s valuation to less than $50 billion. Didi vast warchest puts it in a strong position to challenge Uber globally by developing autonomous vehicles and new public-transportation management programs, as well as expanding its use of electric vehicles.

Didi’s bid for a majority stake in Brazil’s 99, first reported in The Information, would pose a direct threat to Uber, which now dominates Brazil’s car-hailing market. Brazil is the largest economy in Latin America, a region crucial to Uber’s global expansion plans. Didi has announced plans to expand into Mexico next year.

Globally, Uber operates in more cities than Didi. But the Chinese company is gaining ground. In addition to controlling China, the world’s largest car-hailing market, Didi has bested Uber in Southeast Asia, where it and SoftBank own a $2 billion stake in Grab, the region’s leading car-hailing service. In India, Didi and SoftBank are major investors in market-leader Ola. It has been widely speculated that in exchange for its investment in Uber, SoftBank will seek to play a consolidating role, restricting Uber’s investments in Asia.

Didi appears to have abandoned hopes of expansion in the the US market. A few weeks ago Didi discontinued its US app service and now encourages users to book rides with Uber’s domestic nemesis, Lyft. Still, Didi’s global expansion comes at a difficult time for Uber, which is grappling with mounting losses and stricter regulatory scrutiny at home and in Europe.

It’s too soon to say whether Uber or Didi will prevail in markets beyond their own borders. But if nothing else, it’s plain Chinese tech firms have emerged as significant global competitors. It will be interesting to see whether, in 2018, Chinese crocodiles’ newfound success in navigating the high seas of the global economy will create new pressures for China to open the Yangtze to a few more foreign sharks.

Happy holidays! Sino-Saturday will return with more China insights in the Year of the Dog.

Clay Chandler


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