A long-awaited regulation giving legal status to online car-hailing services in China was released by the central government on July 28.
The regulation, approved and released by the State Council, aims to regulate the taxi market and car-hailing services in China. It will take effect on Nov 1.
The regulation also requires that car-hailing platforms, such as Didi Chuxing and Uber Technologies, review the qualifications of drivers and their cars to guarantee safe rides.
The platforms are responsible for checking whether drivers’ private cars are in good condition and are insured, and they must report the results to local transportation bureaus.
The threshold for drivers to enter the business is also regulated. Drivers with three or more years of driving experience and a clean driving record, including no record of dangerous driving, drug abuse or drinking and driving, are eligible to provide car-hailing services.
“China has become the world’s largest market for car-hailing services,” said Liu Xiaoming, vice-minister of transportation.
He added that car-hailing services have improved passengers’ riding experience but also exposed some problems, such as leaks of personal information and issues of passenger safety.
The regulation will boost car-hailing services in the long term, he said.
After car-hailing services debuted in the country in mid-2014, the lower prices soon attracted many passengers, prompting protests from taxi drivers across China.
Fights between taxi drivers and car-hailing service drivers were often reported by the media.
The announcement of the regulation legalizing online car-hailing services dispels the regulatory uncertainties for major players such as Didi and Uber, which have invested heavily while fighting for market dominance in China.
Both Didi and Uber welcomed the new regulation in statements on July 28, saying they believe it will usher in new growth for China’s online ride-booking industry.
“We are pleased to see in the rule that a licensing and regulatory framework is created for ride-sharing platforms, drivers and vehicles,” Beijing-based Didi said in a statement. The company said that “soon it will initiate the application for the appropriate licenses”.
Liu Zhen, senior vice-president of corporate strategy for Uber China, said the company is “regulation ready” and “looks forward to working with policymakers around the country to put the regulation into practice”.
Before the new regulation clarified the services’ legal status, ride-hailing services had already changed the way that people commute in China, especially in urban areas. For example, Didi said it completes more than 10 million ride-hailing orders each day.
Zhang Guoqiang, who works part-time as an Uber driver in Beijing, said he feels “quite relieved”.
“There were times when drivers working for Didi or Uber got caught by the police and fined up to 10,000 yuan ($1,500) because the service was in the gray area,” he said.
Zhang Xu, an analyst with Analysys International, said the new regulation has taken the ride-sharing model into full consideration.
“For example, the new regulation allows vehicles to run on online platforms until they reach ... 600,000 kilometers, which is acceptable for a large number of part-time drivers,” he said.
However, what is good news for ride-hailing apps means more pressure on the traditional taxi industry, he added.