Uber should probably get out of China.

The country’s two largest car-hailing app makers — Kuaidi Dache and Didi Dache — just announced a merger of sorts. Together they have 99.8 percent of the on-demand ride market. China has an enormous, growing population of mobile phone users and potential riders, but what does Uber really get by fighting for this hair’s-width sliver of the Chinese market?

Uber will probably try to hang on in China, if only because it has to prove it has global potential to validate its current $41 billion valuation and set itself up for a huge IPO in the future.

Remember the domino theory from your history books? The Cold War-era doctrine held that if one country embraced Communism, then its neighbors would each eventually topple into the Red Menace’s arms. Whether or not the threat was real, U.S. foreign policy gurus depended on it to justify decades of global intervention.

Uber’s own version of the domino theory goes something like this: If one country doesn’t embrace Uber, then maybe other countries won’t either. So Uber has to be everywhere, even if it may not make business sense.

Losing out in global markets wouldn&apost threaten Uber’s very existence, but it does threaten the premise that underpins its huge valuation -– that taxi-hailing apps are a winner-takes-all market and that Uber can be the most important ride-hailing option in most major cities in the world.

When Uber raised its last funding round, board member Bill Gurley told the Wall Street Journal that, “International expansion probably is the key theme of the fundraising.” Uber has already marched into more than 250 cities in 54 countries(and counting) around the world.

China, unsurprisingly, is a piece of Uber’s global expansion strategy. Almost every international company has tried to find a way to profit from China&aposs huge, developing economy and growing middle class. Apple’s success in China contributed significantly to the company’s recent blockbuster quarter. Companies like Facebook and Google, long blocked in China, are trying to find ways to reach the country’s 649 million Internet users. (Yes, that’s twice the entire population of the U.S.)

Uber seemed positioned to make some headway when it got an investment from China’s Baidu, an Internet search company, last December. As part of the deal, Uber got access to Baidu’s mapping technology and, potentially, the company’s clout in a country where local players are often favored over foreign counterparts.

Equally important to Uber was the fact that Kuaidi Dache and Didi Dache were also in the midst of a brutal price war at the time that threatened the future health of both businesses.

But Kuaidi and Didi have decided to merge, meaning they’ll no longer need to keep prices so low. They’ll own the market while the competition withers.

Companies that want to merge in China don’t have to have the deal reviewed by Chinese regulators unless they have combined revenue of about $320 million. Quartz says that a combination of Kuaidi and Didi doesn&apost meet that threshold.

If Kuaidi and Didi aren’t jointly making more than $320 million and they jointly represent almost the entire Chinese ride-hailing market, is it worth it for Uber to fight for the remaining few million dollars? I realize that the total size of the pie will grow, but this still seems like a lot of work for very little gain.

But if Uber leaves China, where does it draw the line? Does it also leave Southeast Asia just because Malaysia-based Grab Taxi says it’s the dominant player in Malaysia, Philippines, Thailand, Singapore, Vietnam and Indonesia? Does it leave other countries, like Brazil, if it’s unlikely to have a monopoly in larger cities?

Can you hear the dominoes falling?

If Uber were to walk away from these markets it would expose the company to a question that I posed last December: Are cab-hailing apps a global business?

I don’t think they are. They don’t have the inherent global reach of hotel chains, airlines or even home rental companies such as Airbnb, all of which cater to people who travel across borders and who have brand loyalty.

Within a city, my loyalty to car services comes down to speed and convenience. I tend to use Uber in San Francisco where it’s usually the fastest option. But in New York City yellow cabs so often roll by while I wait for Uber that I’ve stopped using the app altogether. Most of the time Uber is just slower in New York, even if the cars are a little cleaner or the drivers offer free bottles of water.

Sam Lessin, a former Facebook executive and a columnist at the Information, had a similar experience when he was in Sao Paulo. He writes:

The availability on [ride sharing app] 99Taxis is much better than Uber. Not even close honestly. Several times, I saw people open Uber and switch right to 99Taxis because there was a slight 1.5X surge pricing or a car would take too long…my experience in Sao Paulo reinforced my view that the company isn’t necessarily a natural global monopoly.

Although it runs counter to the dominant Uber narrative, the company has been left far behind in China and has robust competition in local markets elsewhere around the world. But Uber and its investors can’t afford to acknowledge that reality, because then the dominoes start falling.

To contact the author on this story: Katie Benner at kbenner2@bloomberg.net To contact the editor on this story: Timothy L O&aposBrien at tobrien46@bloomberg.net.

This article was written by Katie Benner from Bloomberg and was legally licensed through the NewsCred publisher network.

Tags: china, taxis
Photo Credit: The blur of traffic and taxis in Beijing -- when cabbies are not on strike. Ernop / Flickr