Feb 26, 2016 · 4 minutes

The very first time we covered the epic ridesharing battle in China between Uber and Didi Kuaidi we noted that it was the first time Uber was going up against a company that had all of the advantages it had enjoyed in the US.

Didi had majority market share (by some 80%).

Didi had the government connections.

And Didi had way deeper pockets.

As Didi’s president Jean Liu bragged at a US press event: “The assets under management and market cap of our key shareholders exceeds $2 trillion in aggregate.”

Many of those key shareholders were present at the press event as a sign of just how much they support Didi. And two of those investors are Alibaba and Tencent which own two of the most crucial platforms both Uber and Didi need to operate in China: Alipay and WeChat.

Recently, Uber CEO Travis Kalanick-- who is coming under investor pressure for spending $1 billion a year in subsidies in China even before Uber announced it was quadrupling its reach to 100 cities-- whined that his problems were all Didi’s fault. As well as confirming that $1bn figure, that we’ve been reporting for months, Kalanick also added this breathtaking piece of un-self-awareness: "We have a fierce competitor that's unprofitable in every city they exist in, but they're buying up market share. I wish the world wasn't that way."

Because, of course, Uber would never use its dominant capital position to ignite a price war in the US. Despite what Lyft has said about Uber, yunno, every day of its existence.

In reality, it’s Uber who has driven the subsidy war in China because it had a paltry 11% market cap and needed some way to grab market share. It was Uber that drove Didi to match those low prices. And we’ve heard from sources recently that Didi has eased off subsidies, finding that actually it was dominant enough in many cities that it didn’t need to always match Uber on price.

But in a sense, it is Didi’s fault Uber is spending $1 billion in China. Because without those subsidies Uber’s market position would be even worse. So investors concerned about this state of play got worse news this week when The Wall Street Journal and Bloomberg both reported that Didi was raising another $1 billion, on top of the $3 billion it raised last year in an oversubscribed round.

Despite Uber’s claims to the contrary, Didi’s spokespeople say the company is already profitable in many of its largest cities. Further, the company told reporters it still had the entire $3 billion left in the bank from last year.

So why is it raising money, other than because it can?

A few reasons come to mind. The first is that Didi has sought to use its market position and cash bolster other Uber spoilers around the world, including Lyft and Grab in Southeast Asia. This helps create an even larger war chest should those companies need greater cash infusions.

Until recently, Uber had been so preoccupied with its US war with drivers, continuing PR woes, and $1 billion battles in both India and China, it hadn’t focused too hard on South East Asia, from what sources told us. That seemed to change this week with its launch of bike service in Thailand. Bikes are an essential way Grab operates in many South East Asian megacities where traffic is so congested a car doesn’t get you anywhere no matter who is operating it.

Another use of the capital is positioning-- similar to that statement about the $2 trillion in market cap, Liu made earlier. It’s a strong message to Uber and its backers: You will not bleed us out and you will not win this market.

It’s also likely a bit of what Uber has done to Lyft here: It effectively takes capital away from Uber China. Chinese institutions-- with the lone exception of Baidu-- have shown they’d rather back Didi. Even investors who backed Uber in the US declined to back Uber China last summer, backing Didi instead. By continuing to raise money locally as the stronger player, it chokes off any ability for Uber China to raise further funds.

Which it obviously badly needs. As is, Uber itself had to put in $500 million in the last round to make it “oversubscribed.”

And even Uber Global seems to be reaching fundraising limits. It’s last round tapped high net worth individuals and Russian oligarchs, not traditional private equity and institutional investors.

Uber is in so deep in China now and so much of its $60b+ valuation is predicated on a win there. Its rhetoric is starting to change from “we’re crushing it!” to “Didi is making our life hell.” But it can’t pull out. It’s only face saving option is getting banned, throw up their hands and say “Evil China has banned another good American company. We tried!”

But there’s no real reason for the government to do that yet because it doesn’t have any meaningful market share and is only in a handful of cities. Meantime, the longer it operates there, the more China bleeds Uber out. If I were Didi execs, I wouldn’t be pushing for a ban anytime soon for that reason alone. And if I were Lyft and Grab and new potential spoiler Juno, I’d be hoping China didn’t ban Uber anytime soon either.