Sharing Economy

China outlines regulations for car-hailing apps

Patti Waldmeir
Uber CEO Travis Kalanick speaks at a ceremony at the Baidu headquarters in Beijing on December 17, 2014. Baidu, China's leading search engine, and ride sharing company Uber announced a strategic investment and cooperation agreement on December 17.
Greg Baker | AFP | Getty Images

Beijing is taking aim at the "sharing economy" in China, publishing draft regulations at the weekend that would impose taxi-like restrictions on private car-hailing services and could raise costs for internet booking leaders Uber and Didi Kuaidi.

The regulations, which will be open for public comment for one month, would require internet-based car-booking operators to obtain licences, set up local offices and maintain China-based servers, China's Ministry of Transportation said in a draft posted on its website on Saturday.

The release comes two days after Shanghai awarded the first municipal internet car-hailing license in China to Didi Kuaidi, an important step toward regulating an industry that has been controversial in cities around the world.

Municipalities from Amsterdam to New Delhi have struggled to control the proliferation of car-hailing apps, ensure passenger safety, and deal with the impact of such services on the traditional taxi industry.

Uber and Didi, the mainland market leader, have long operated in a grey area of Chinese law, with most municipalities ruling private taxis technically illegal. That ban has not been rigorously or consistently enforced, however.

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Reports in domestic media have suggested Beijing is planning by the end of the year to unveil national rules that could either formally legalize the growing car-hailing industry or strangle it.

People in the industry point out that even if the draft regulations are adopted, there still would be ample room for municipal regulators to issue detailed local policies that could affect their implementation. Some of the rules are as strict as those on the heavily regulated traditional taxi industry, and thus could prove costly if rigorously enforced nationwide, they said.

Uber welcomed the draft, saying that it "demonstrates [the] government's recognition and support of online car-hailing services". The US-based company added that it already meets some of the criteria set out in the draft, including having servers located in China.

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"We are in close communications with local regulators, and will…follow the spirit of the draft regulation, comply with all requirements, and continuously partner with local governments in implementing the new set of rules," Uber said. The new regulations could make it possible for Uber, Didi Kuaidi and potentially other services to be fully legalised in China, industry observers said.

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The draft rules included requirements that such services share data with local transport authorities, register their cars as taxi services, insure cars and passengers and have labour contracts with drivers. Car-pooling and ride-sharing services offered by private drivers without a taxi licence would be banned.

"The policy would have a disastrous impact on the taxi-hailing industry if it takes effect since it would ban private cars," said Zhang Xu at Beijing consultancy Analysys.

The draft also appeared to signal Beijing's intent to bring China's heavily subsidized cab fares more into line with market pricing, by gradually eliminating fuel subsidies for the traditional taxi industry.