China vs. USA – The first cracks.

The CCP does what the USA cannot.

• Didi is a great example of the long-term negative effects of overregulating an industry can have and hands an advantage to China’s arch-rival, the USA.
• Didi is suspending its plans to expand into the UK and Europe for at least one year but this could be much longer or even permanent depending on how badly the CCP crushes its business model.
• Didi’s decision to delay its global expansion is a direct result of the relentless regulatory pressure being placed upon it by the CCP which is determined to ensure that it is the CCP and not the free market that controls the flow of data in China.
• Didi is facing heavy regulation on both how it uses customer data as well as how it is pricing its services to providers of transportation.
• The net result could be much lower margins and heavy curbs on the quality of its service which is often improved by crunching user data to make the service more efficient and intuitive for both riders and drivers.
• This in turn means cash being made available to invest in innovations and growth which will slow the development of Chinese ride-hailing in the long term.
• This is a demonstration of how top-down control comes at a cost which in this case is a slow down in the spread of Chinese technology globally.
• This stoppage will give its competitors more time to entrench making it more difficult and more expensive for Didi to win business overseas when / if it does finally decide to get back into gear.
• The same is true at home where the suspension of new user additions has reinvigorated competition and emboldened once-beaten peers to have another crack of the whip.
• Similar, although less severe, impediments are being placed on the rest of the technology sector, and the emerging fintech and after-school education industries have been all but wiped out.
• While this is good for the CCP now, in the long run, it is going to hurt China’s ambitions to become a world leader in technology.
• Its best entrepreneurs are now more likely to head overseas to a lighter regulatory territory as they will have a better chance of succeeding and greater access to the capital they need.
• This could be very negative for China which is a race to build the next generation of technology standards and in areas like AI and autonomous driving it has been just as good as the USA, if not better in some cases.
• However, if its best people are incentivised to start their businesses and build their technologies elsewhere, then China will fall further and further behind.
• China continues to do more to further the ambitions of the USA than the USA could ever achieve on its own.