Apple is making big moves in China.
On Thursday the tech giant announced it was investing $1 billion in the Chinese ride-hailing company Didi Chuxing, which is the largest company of its kind in China. (Think of it as the "Uber of China.")
The startup serves 400 Chinese cities and has about 300 million users, so of course there's the possibility that the investment may eventually open up new opportunities for Apple in the mobility space. But the more immediate advantage the partnership holds is purely political.
You see, it’s notoriously difficult for American tech companies to be successful in China. This is mostly because of the country's strict censorship practices. But Apple has historically been the exception to this rule.
The iPhone maker sold about $59 billion worth of products during the last fiscal year and has seen strong growth in the region during the last few years.
But recently, Apple has faced a number of hurdles in the country.
According to the company’s second-quarter earnings, Apple’s revenue from China has fallen 26% since last year, indicating slowing iPhone adoption. And in April, Chinese regulators shut down the company’s iBooks and iTunes movie stores in the country.
Making matters worse, Beijing has increasingly intensified its effort to promote local tech companies over foreign ones. So for Apple to continue to grow its business in China, the company had to do something to prove to the Chinese government that it was invested in China as a whole.
This is where Didi Chuxing comes in.
The Chinese startup has some pretty big investors already, including the Chinese tech giants Alibaba and Tencent. But another notable investor in the company is China Investment Corporation, which is China’s sovereign wealth fund, which is part of the Chinese government.
So by making a $1 billion investment in Didi, Apple is basically sending a strong message that its interests are aligned with those of Beijing — and that should help it stay in China's favor, at least for awhile.
