Just days after Didi Chuxing went live on the New York Stock Exchange, Chinese regulators announced on Friday that the ride-hailing service was under review and banned it from ing up new users.
Since the s, Chinese drivers have been trying to get by—and to stay out of the eye of the authorities. Being a cab driver meant having access to a vehicle, a rare luxury and one, as the anthropologist Mayfair Yang describes in her seminal Gifts, Favors, and Banquetsthat bought great status and the opportunity for profitable exchanges.
As cars became more common, taxi drivers diminished in status—and their profits started to shrink. Local governments also became wary of the growing of drivers; inBeijing, for instance, froze the at 60, That meant that the bulk of the profit in the industry went not to individual drivers but to the taxi firms that controlled 98 percent of the s and which often provided the vehicles.
With most drivers renting their cars from the firms, it became a struggle to earn a living after paying costs every month. That made drivers eager to take only the most profitable routes, leading to them often turning down fares—and since the firms routinely charged them extortionate amounts for cleaning, would-be passengers during rainstorms or muddy days were out of luck. They were private vehicles operating story of didi aadvertising themselves through a string of lights hung on the back window, and negotiating fares at the outset based on distance rather than a meter. Some were regular drivers—but others were opportunists, picking up fares by chance when the streets were empty of cabs.
Heiche were usually about twice the price of an ordinary cab, and they had a reputation as scam artists.
But they were sometimes the only choice. Even regular cab drivers sometimes acted as heiche, accepting longer fares only on agreement of a set fare and turning off the meter.
What didi got wrong
Stuck in another, deadly storm inI got a ride by waving three yuan notes at a taxi. They found other ways to skirt regulations. The police or the chengguan so-called urban managers who fill many roles performed by cops elsewhere, such as traffic control and handling street vendors, sometimes through violence would attempt occasional crackdowns, to little effect, especially since they would often accept a bribe in lieu of a fine. From onward, taxi prices rose from 1. But being a taxi driver remained a parlous financial prospect.
The price of the fixed start fee, which went from 10 yuan to 13 yuan, stayed too low, discouraging drivers from short trips. So were the fees for just waiting—a critical problem in a city whose vast roadways were deed for troops, not traffic. Beijing, like many other Chinese cities, consists of massive city blocks with no passages through them, creating numerous choke points at rush hour.
A journey of 15 minutes could easily turn into 60 or 90, especially since the ro were also regularly blocked for motorcades.
All this made rush hour a poor prospect for drivers, who sometimes lost more money on fuel than they made from the meter, resulting in thousands of them simply taking those hours off. That produced a mass shortage of cabs just when they were most needed. The ride-hailing giant was formed from the merger of two successful apps, Didi Dache and Kuaidi Dache, in The three years had seen numerous apps emerge, but Didi had been backed by Tencent and Kuaidi by Alibaba, both giant internet companies already.
Uber, which had arrived in China inhad already pioneered the model of simply ignoring story of didi laws or regulations in numerous jurisdictions worldwide and then defending itself in court. The same went for the ride-hailing apps in China, which were operating in, at best, a legal gray zone. They were essentially a heiche interface but one that was far more convenient, cheaper, and more protected against scams—and that had the money and political connections to avoid being shut down. Existing cab drivers protested Didi, but over time many ended up ing the service.
Soon you were as likely to be picked up by the familiar form of a yellow cab as by a private driver.
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For those who were virtually locked out of being able to use the app, like foreign tourists or older people who struggled with technology, rides became even more inaccessible. But for many other passengers, it was a godsend, removing the stressful process of trying to find a ride, especially at story of didi times. Like Uber, Didi made massive losses, offering subsidies to drivers and riders alike to lure them to the platform.
The era of the heiche was well and truly over—or so it seemed. And a willingness to burn through capital and a home advantage let the firm triumph over Uber that same year, acquiring its Chinese branch. Both firms had sought leaders thoroughly positioned on the inside of existing power networks. The popularity of the app was creating a new class of migrant workerscountryside drivers who would head into the big cities to pick up fares, often sleeping in their cars.
Metropolises already trying to force out workers were wary of this influx.
As a result, urban authorities started to demand far more certification for drivers, including that their cars be expensively registered as commercial vehicles, effectively deterring the part-time drivers who had ly been a majority. In Beijing, Didi drivers now needed a taxi and to have a Beijing hukou —the household registration system used to restrict population movement.
The of drivers went sharply downward, and waiting times steeply increased. Didi doubled down on public obeisance to the party—the usual tactics of Chinese firms that fear government troubles. The company boasted that it would hire a thousand Communist Party members for customer service positions. The app stayed extremely popular—in part because of the lack of alternatives.
Inthe firm saw its first profitable year.
China explained: the rise, fall, and uncertainty of didi’s ride-hailing dynasty
That was a strong runway into the next stage of its business ambitions: a Western initial public offering IPO. It was the next logical step for a company that was hiring worldwide and looking to further expand outside of China. With U. China has passed several laws deed to give the government access to any data used by firms operating in the country—and to prevent foreign powers from any use of it. Invasions of privacy have been a serious worrybut the main purpose is the constant aim of the Chinese Communist Party— control.
The party is also involved in a crackdown on domestic big tech firms, fearing not only data leaks but the potential political power of any institution not completely controlled by the Communist Party. Ma has all but disappeared from public life.
Didi ignored the warning—a bafflingly foolish move in the political context of China today. Perhaps the company hoped to pull one of the riskiest tricks of Chinese private firms: making an announcement public enough that going against it would be an embarrassment for the authorities. If you let me down, then our city will have produced the biggest trickster in the whole country.
They were very wrong. Not only does Didi now face a political storm, but the crackdown has expanded to other firms with recent foreign listings.
The ride-hailing app won the chinese cab wars. its next logical step turned out to be a huge mistake.
On Tuesday, the State Council announced that more restrictions were coming on foreign listings. Other Chinese firms that have already listed in the United States, like Weibo, may be looking to go private and then relist in China. That may be followed by a leadership shake-up. If the company is politically damaged enough, powerful party predators may move in, looking to get a financial stake in the firm themselves—the fate of many other businesses.
James Palmer is a deputy editor at Foreign Policy.
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