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Google left. Facebook is blocked. Amazon is struggling to make headway. And if further proof were needed that China’s tech market is a world apart, this week seemed to provide conclusive evidence. Uber, a ride-hailing service that is the world’s most valuable startup, decided to sell its local unit to Didi Chuxing, a Chinese rival. Its China dream, like those of so many before, is dead.
The usual story about the isolated nature of the Chinese market is that foreign firms are either blocked altogether or hobbled by regulators. But China is not as impenetrable as its critics suggest. WhatsApp, the world’s most popular messaging app, which is owned by Facebook, is freely available in China; yet it is dwarfed by WeChat, China’s leading app. China is the largest market for Apple’s iPhone. And Uber made a valiant effort to establish itself in China, the world’s largest ride-hailing market: a 17.7% stake in Didi is not a bad consolation prize. Nor are Chinese tech giants walling themselves off from the rest of the world. They have invested in American startups, including Snapchat and Lyft, and bought mobile-gaming firms like Supercell of Finland and Playtika of Israel.
Being present in the Chinese market is all very well, comes the retort, but not if you are stopped from winning. That gives too little credit to China’s tech leaders. Ride-hailing, like many online businesses, is a cut-throat, winner-takes-all market: Didi itself is the product of a 2015 merger of two local firms. Uber was outcompeted. Didi understood the local culture, integrated better with social-media platforms and got taxi drivers onside by incorporating them into its app from the beginning. In outlawing subsidies, the regulators called time on a fight the American firm had already lost.
Similarly, whatever the settings of the Great Firewall, there is nothing outside China that offers WeChat’s combination of features. It has over 700m monthly users, and combines messaging, voice calls, browsing, gaming and payments. It can be used for everything from paying parking tickets to booking a hospital appointment, ordering food or paying for a cup of coffee. WeChat is not so much an app as an entire mobile operating system, and accounts for more than one-third of all time spent online by Chinese mobile users. To Chinese users, Western apps look hopelessly backward.
WeChat is the best riposte to the condescending, widely held belief that Chinese internet firms are merely imitators of Western ones, and cannot innovate themselves. But it is not the only example. Alibaba kick-started Chinese e-commerce with the clever trick of holding payments in escrow, helping buyers and sellers establish trust. It now offers services that exploit its vast customer database, including credit-scoring, digital marketing, and vetting visa applicants and users of dating sites. With revenue from payments, virtual goods and gaming, Chinese internet firms are also much less dependent on online ads than Western rivals.
38. The following are the reasons for Didi’s success in China EXCEPT .