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Chinese city of Guangzhou to launch Uber rival service

Yongyuan Dai | Getty Images

Guangzhou's municipal government is planning to launch its own Uber-like online taxi hire service, only weeks after police closed the San Francisco-based transport app's office in the southern Chinese city.

The new company, Ruyue (meaning "by appointment"), will offer rides to customers using a smartphone app. However, the journeys will be provided by the four taxi companies with licences to operate in Guangzhou, which had faced competition from Uber before it was shut.

The timing of Ruyue's looming launch — weeks after Uber was taken out by a police raid — has raised questions about the city's commitment to a level playing field.

"It is hard to say for sure whether the crackdown against Uber in Guangzhou was directly related to this new app, but I think it is natural to make the connection," said Zhang Yi, head of iMedia, an internet consultancy in Guangzhou. "It appears the intention was to clear the scene for the new government-run app."

State-run companies that dominate many sectors in the Chinese economy face pressure from nimble internet companies that can disrupt inefficient markets such as transport and financial services.

However, taxi hire apps — both Chinese and foreign — face attention from law enforcement agencies in many Chinese cities due to prohibitions on unlicensed taxi operation.

Ruyue will be run by the Guangzhou Public Transportation Data Center, part of the city's municipal transportation committee, and initially have access to almost 3,000 cars from partner companies.

The app has been in testing stages since earlier in the year and is supposed to work with all suppliers of private car-hailing services.

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In practice, however, the only winners of the company's tender process were four licensed taxi companies — Baiyun, Guangjun, Jiaotong and Lixin — according to an article in the Southern Daily, a local Communist party affiliated newspaper.

City officials quoted in the media have said the launch of Ruyue is expected within weeks, though no specific timeframe was given.

Uber is no stranger to controversy, having weathered attention by regulators across the world. Uber and other car-hailing apps such as Didi Dache and Kuadi Dache skirt the legal ban on private taxis by offering rides in rental cars.

One Uber service, People's Uber, which is priced to compete directly with cheap licensed taxis, offers rides from private cars.

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On May 1 Uber's Guangzhou office, which comprised a driver support centre with two staff, was raided by police who confiscated equipment and closed it, saying it did not have a local business licence. The office remains closed pending application for a new business licence, said Uber.

Uber declined to comment on the Ruyue rollout, though independent analysts said it set a harmful precedent.

"It is hard to have huge expectations for Ruyue as it is government-run and the four companies are all state-owned so essentially it still has not broken up the monopoly," said Mr Zhang.