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Didi Chuxing, Uber’s Chinese ride-hail competitor, just raised $7 billion in equity and debt

More money for the arms race.

Didi Chuxing CEO Jean Liu Asa Mathat

China’s homegrown ride-hail player has closed a more than $7 billion round of funding from investors and lenders, Recode has confirmed.

Didi Chuxing, formerly Didi Kuaidi, raised a total of $4.5 billion from investors, including the $1 billion it received from Apple a few weeks ago. The company received the rest, approximately $2.8 billion, from lenders. Part of that debt investment, $305 million to be exact, came from China Life Insurance.

This brings the valuation of the company to $28 billion, according to a source familiar with the company. While that may seem to pale in comparison to Uber’s valuation of $68 billion, Didi operates only in China, while Uber is in more than 70 countries.

The Wall Street Journal first reported the funding.

The newly closed round adds more fuel to the already heated race between Uber and Didi. Just yesterday, we also confirmed that Uber was looking to raise $2 billion in debt after closing a $3.5 billion investment from Saudi Arabia’s sovereign wealth fund.

As we wrote yesterday, it's not typical, but companies like Uber and now Didi will sometimes turn to lenders instead of investors for funding to avoid diluting existing investors’ shares and when there are fewer private investors to tap for cash.

In China, where Uber and Didi compete, both sides are embroiled in a subsidy battle to attract drivers and riders. At the Code Conference, Didi President Jean Liu said the company is subsidizing fewer rides, and thus losing less money on those rides, but drivers in places like China and India will often flock to the company offering the most supplemental cash on top of their fares. So once companies start to subsidize their rides, it's often difficult to stop unless all competitors do.

To make matters more complicated, the Chinese government has also placed limits on car ownership — people have to apply for cars and can wait four years or more to receive one — and has even placed limits on which days cars with license plates that end in even numbers can be driven. The larger goal is to reduce traffic congestion and related pollution, but it creates a system where drivers may be plentiful but cars are scarce. So, Didi has to find ways to partner with taxi and car rental companies for supply. That takes time and money.

While Didi primarily operates in China, the fight against Uber is global. Didi is also an investor in and has partnered with three of Uber’s primary competitors in other parts of Asia and the U.S.: Lyft, Ola, and Grab.

That global anti-Uber alliance may not have produced anything outside of two cross-booking features — one between Didi and Lyft in the U.S. and another between Grab and Lyft in the U.S. — but any additional resources flowing to Didi will allow the company to continue to invest in the larger global alliance.

This is all to say, competing for the Chinese and the global transportation markets requires an arms race, and taking on debt may be the answer to a slowly waning pool of VC money to tap into.

This article originally appeared on Recode.net.

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