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Apple Pours $1 Billion Into Chinese Ride-Hailing Firm

FILE - A taxi driver is reflected in a side mirror as he uses the Didi Chuxing car-hailing application in Beijing, China, Sept. 22, 2015.

FILE - A taxi driver is reflected in a side mirror as he uses the Didi Chuxing car-hailing application in Beijing, China, Sept. 22, 2015.

In a significant move, Apple Inc. has invested $1 billion in Chinese ride-hailing platform Didi Chuxing. The move comes after Apple's recent tiff with U.S. authorities over the sharing of its source code, and the company's preparations for chief executive Tim Cook's visit to China later this month.

Analysts said the move is meant to intensify Apple's engagement with its second-biggest market, and also enlarge the iPhone maker's recent efforts to diversify outside the core business.

Sales of Apple's iPhones have fallen for the first time, and this is expected to further accentuate the tech giant's efforts to explore other pastures.

iPhones on display at an Apple store in Virginia, USA, April 4, 2016. (Photo: Diaa Bekheet/VOA)

iPhones on display at an Apple store in Virginia, USA, April 4, 2016. (Photo: Diaa Bekheet/VOA)

"We decided to make the investment for a number of strategic reasons, including the chance to learn more about certain segments of the China market. We see lots of opportunities for closer cooperation between the two companies, and we also believe it will deliver strong returns," Cook told official news agency Xinhua.

A $1 billion investment by a $200 billion company may not be the biggest possible, but Apple's move in China has larger dimensions in terms of building relationship with local authorities, analysts said. Aligning with a Chinese company may also help soften attitudes in Chinese media, which have often been critical of Apple's businesss dealings with China.

"Apple's move will not just boost Dadi, it will also enhance China's image as an investment destination at this time of economic slowdown," said Jacob Cooke, head of the Beijing-based consultant firm Web Presence in China.

Relations between Beijing and the giant U.S. company have been warmer in recent months. Chinese recently allowed 11 banks, most of them state-owned, to contract with Apple Pay for an online transaction service to rival AliPay, owned by the huge Chinese e-commerce firm Alibaba.

Joseph Baladi, CEO of BrandAsian, a Singapore based consulting firm, said the decision would not hurt the company's branding as the investment is not directly related to the Apple brand.

"The investment is an interesting one because it suggests an additional dimension to the company’s continuously evolving eco-system," Baladi said. "Given the connective tissue between driverless cars and vehicle-related apps, it would be more surprising not to see Apple invest in the space."

Bad news for Uber

The investment may be bad news for Uber, which has been struggling to find its feet in China. Since Didi Chuxing already controls 87 percent of the Chinese market, the new investment will make it easier to expand globally. The Chinese ride provider recently poured $100 million into Lyft, Uber's biggest competitor in the U.S., and invested a similar amount in the Indian taxi service Ole.

"Like Apple, Didi is focused on providing a great experience to Chinese customers, and in the process they're creating jobs and economic opportunities through innovation. It is also helping the environment by reducing the number of cars on the road," Cook said.

Cheng Wei, founder and CEO of Didi, said, "The endorsement from Apple is enormous encouragement and inspiration for our four-year-old company."

PR move by Apple

Analysts also feel the $1 billion investment is a massive public relations effort by the US tech giant, which has been facing stiff resistance in China, both from regulators and sections of state media which have questioned its business practices and labor management by Apple contractor Foxconn.

As iPhone sales slipped, the state-run Global Times said, "Although it is too early to say whether or not Apple will follow the steps of Nokia, it seems the time has come to consider whether the technology giant will announce plans to cut production if iPhone sales continue to fall".

Last month, Apple's iBooks Store and iTunes Movies services were suspended after the government issued rules that said, in part: "Chinese-foreign joint ventures, Chinese-foreign cooperative ventures and foreign business units should not engage in online publishing services."

It is not clear what Cook will discuss in his coming visit to Beijing, but Apple's linkages with China are expected to grow thicker in the coming months.

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