Didi Dache and Kuaidi Dache, two of Chinas leading taxi-hailing apps have announced plans to merge, creating one of the worlds largest smartphone-based transport services as a result.

The resulting merged company will be valued at around £3.9bn, and although a name for the combined entity has not been announced, it is understood that the two firms will continue to operate separately under their existing brands.

Didi and Kuaidi have received funding from Chinese internet heavyweights Tencent Holdings and Alibaba Group respectively, and have been engaged in a price war for much of the past year as they have sought to corner the swiftly growing Chinese markets, with both companies rumoured to be making losses as a result.

The two companies account for almost 100 per cent of the Chinese taxi-hailing market between them, with Didi estimated to hold a slightly larger share, leading to speculation that the deal may be scuppered by anti-monopoly laws, although these have traditionally been quite weak in China.

The Chinese transport market is the largest in the world, with analysts estimating that 150m Chinese consumers use taxi-hailing and ride-sharing apps on their smartphones. However, the Chinese Transportation Ministry has begun to crackdown on such apps, with Uber shut out of the country last month following a ruling that private vehicles could not act as taxis.