In case you hadn’t noticed, market forces have recently slammed the brakes on China’s runaway economic expansion. Last week, official data indicated a contraction in its manufacturing sector. Today it’s trade – exports fell 6.1% in yuan terms in August compared to a year before, while imports fell even more steeply, by 14.3%.
That’s the tenth consecutive month imports have fallen. Underpinning these scary numbers are the decline in commodity prices and a fall in Chinese domestic demand (hitting imports) and an apparent cooling in global demand (hitting exports).
Of particular note is the 13% month-on-month decline in Chinese crude oil imports by volume, indicating falling use and thus falling activity. Time will tell whether that’s a blip or a harbinger of doom.
None of this is troubling Travis Kalanick, the chief executive of ride-hailing startup Uber, which recently confirmed that it’s raised $1.2bn (£779m) so far in an ongoing funding round for its China division. One of the investors is Chinese search engine Baidu, at whose conference Kallinick spoke today.
‘When we started this year, we were about one percent market share. Today, nine months later, we're looking at about 30 to 35 percent market share,’ he said, announcing plans to expand from 20 Chinese cities to 100 by the end of the year.
Uber China already provides 1 million rides a day and is expected to overtake the US division by the end of the year. China’s expansion has created huge strains on its infrastructure, making taxi-sharing technology all the more appealing for both consumers and the state.
Although Uber has had issues with the law in China as elsewhere, it’s making a real effort to position its division there as an essentially Chinese business. This ranges from Kalanick adopting a rather Confucian attitude – ‘progress always has to be in harmony with stability’ – to its deepening partnership with Baidu.
The search engine is helping Uber in everything from mobile payments and map services to introductions to local government officials. Uber needs it. More than in any of its other markets, Uber is in a tooth-and-nail fight to establish supremacy.
It trails Chinese firm Didi Kuaidi in market share, though Kalanick told investors in June that Uber is growing ‘significantly faster’ because Didi relies on its ‘legacy taxi business’ (i.e. summoning licensed taxies like Hailo or Gett, neither of which has been able to supplant Uber in the UK).
Didi has powerful backers in China, however, including investment giant Tencent, which Kalanick claims blocked Uber’s account on its popular WeChat service, and has itself just raised $3bn to finance its own expansion.
The wider economy slowing down hasn’t deterred either firm or their investors (Uber’s include Google and Goldman Sachs, no less) from the opportunities China has to offer. Indeed, a slowdown might actually encourage more people to take a cheaper ride to work, or to turn to part-time driving if they can’t find a job. It would certainly encourage Uber to redouble its efforts to raise funding, while the money's still there.
Whether Uber can pip Didi in the race to capture this huge market, and in the process become the second western tech giant after Apple to break China, remains to be seen.