Didi Global back-pedals on plan to cease ride-hailing operations in Russia as Western allies close ranks against invasion of Ukraine

The Beijing-based ride-hailing giant will continue operations in Russia, days after saying it would exit the country and Kazakhstan from March 4
The company has been under duress since last summer, soon after its US$4.4 billion initial public offering in New York

Didi Chuxing

Yaling Jiangin Shanghai

Published: 10:00pm, 27 Feb 2022

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Chinese ride-hailing giant Didi Global, which remains under a cybersecurity investigation by Beijing, has back-pedalled on its earlier decision to cease operations in Russia at a time when Western allies have started to close ranks against Moscow’s invasion of Ukraine.

“Didi Chuxing will not shut down its operations in Russia,” the company wrote in a post on microblogging platform Weibo on Saturday, using its Chinese name. “We will continue to operate in Russia and serve the country’s drivers and passengers.”

It marked a U-turn for Didi after announcing on Monday that it would exit Russia and Kazakhstan from March 4 because of “changing market conditions and other challenges” that would prevent it from being able to “provide the best results”.

The Beijing-based company, which went public in New York last year under the name Didi Global, did not immediately respond to a request for further comment on Sunday.

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Didi’s sudden change of plan in Russia has fanned speculation on whether it is under pressure amid Beijing’s opposition to economic sanctions against Moscow.

“It would be plausible to assume that the Chinese state shareholders have been able to reverse that decision,” said political economist Shirley Yu Ze, a senior practitioner fellow with the Ash Centre of Harvard Kennedy School, the public policy institution of Harvard University in Cambridge, Massachusetts.

Yu said a communique, released after Chinese President Xi Jinping and his Russian counterpart Vladimir Putin met on the sidelines of the Beijing Winter Olympics, stated that the partnership between China and Russia have no defined boundaries.

“Chinese foreign direct investment in Russia will be a big indicator of this limitless partnership,” she said.

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While there is no evidence that political factors prompted Didi to reverse its decision to pull out of Russia, the ride-hailing giant has been under duress since last summer, soon after its US$4.4 billion initial public offering (IPO) in New York. The company was said to have “forced its way” to an overseas listing after warnings from Chinese market regulators over cybersecurity concerns.

Internet watchdog the Cyberspace Administration of China launched an investigation into Didi days after its IPO, forcing the company to freeze sign-ups for new customers and resulting in its apps being removed from app stores. In December, Didi said it would commence the process of delisting its stock from the US for a listing in Hong Kong.

“Didi’s payment options will be severely affected in Russia, putting more pressure on earnings” following an agreement between the US government and its Western allies to eject some Russian banks from the Swift global payment system, political economist Yu said.

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Besides financial services, the US, the European Union, the UK, Taiwan, Canada and New Zealand have initiated various sanctions targeting Russia’s energy and transport sectors.

Didi Global posted a 1.8 billion yuan (US$285 million) loss from its international operations in the third quarter of last year, compared to a 29 million yuan deficit from its domestic operations in the same period, according to the firm’s unaudited results.

Apart from its home market and Russia, Didi operates in various countries across the Asia-Pacific region, Central Asia, South America and Africa, according to information on its website.

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China, however, has opposed sanctions imposed by the West on Russia. “Our position is that sanctions are fundamentally never effective in solving problems,” Chinese Foreign Ministry spokeswoman Hua Chunying said in a press conference this week. “We consistently oppose all illegal, unilateral sanctions.”

In an online commentary on Saturday, Mei Xinyu, a researcher at the Chinese Academy of International Trade and Economics Cooperation under the Ministry of Commerce, said Didi’s previous decision to close its Russian operations was “in line with business logic”.

“It was reasonable to cut loss-making international businesses to focus on domestic services,” Mei wrote.