Business, Internet, Law & Policy

Uber Decides It Can't Win In China As It Merges With Chinese Rival

No major Western software or online business has ever succeeded on its own in China for a sustained period of time, so it's not remarkable that U.S.-based Uber has kowtowed to its Chinese rival in a billion-dollar deal.

While a few weeks and months ago it was viewed by China Internet watchers as foolhardy and blind avarice for Uber to continue its waste of money in China, it is now a sign of maturity that the company has figured out what Yahoo long ago figured out: if you can't beat them in China, join them in China. Yahoo many years ago gave up its Chinese operations to e-commerce giant Alibaba in exchange for a stake in Alibaba.

Uber will reportedly exchange its local Chinese operations for a 20% stake in Didi Chuxing, Media like WSJ.com are reporting that Didi will then invest USD1 billion in Uber at a USD68 billion valuation. This deal makes Uber then the biggest shareholder in Didi.

Last week word came from China's Ministry of Transportation that ridesharing services would be legalized in China. Many foreign media incorrectly saw this move as a boon for Uber, but actually it creates more roadblocks as the Ministry placed implementation decisions in the hands of the thousands of municipalities in which Uber would operate. So, essentially, Uber's business could very much still be blocked by local protectionists in China.

Uber quite possibly and smartly saw the move last week as a positive move by the Chinese government overall, but specifically that they would need to now spend lots more time and effort trying to win over local transportation and public security agencies throughout China.

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