“China Is Hard”

Perhaps I’m too much a product of the West, but I think the downfall of autocratic societies, especially protectionist ones, is contained in their DNA, China included. The system seems antithetical to the human spirit and opposed to nurturing a creative class. That could be the reason why China has thus far not produced any great products.

That said, it’s impossible to overlook how far and fast China’s economy has grown, all while dominating its own massive market. In a smart Backchannel article, Steven Levy analyzes, in the wake of Uber’s capitulation, the impervious nature of the nation’s tech sector for American companies. An excerpt:

China is the world’s biggest internet market, and it’s destined to become the leading economy of this century. American technology companies are desperate to compete there, with dreams of reaching the same dominant market share in China that they have elsewhere in the world. But instead of commercial triumph, there has been a series of ignominious retreats, even for some of the most glorious pillars of American tech: Amazon, eBay, Google, and so on. Meanwhile, Facebook hasn’t even gotten far enough in the market to make a retreat. It keeps edging closer, even to the point where its CEO has learned to speak Mandarin— but can’t figure out how to enter the country while still following China’s strict rules of censorship and control of data.

Uber was the latest gladiator, and seemingly one that had a chance at victory. It was going head to head with its Chinese rival Didi with a war chest full of cash and a world domination mentality. As late as this past June, Uber was predicting it would pass its rival within a year. Now Uber is simply the most recent American internet giant who decided China was not worth the fight. And it probably won’t be the last.

China is hard. The reasons differ according to the sector and the company, but the combination of culture, nationalism, and especially a government that likes to tilt the playing field has prevented American giants who excel overseas from dominating in China. This is not to say that Chinese government regulation drove Uber’s deal with Didi, which was clobbering Uber in the ride-sharing market; in fact, Uber felt it was treated fairly by a government interested in transportation innovation. According to reports on the ground, Didi used its local knowledge to act more nimbly in satisfying Chinese customers. But my guess is that if the American ride-sharing company had been more successful, China would have put a Mao-sized thumb on the scales.•