China Sets First-Ever Rules for Ride-Hailing Companies
China's Cabinet issued its first rules for ride-hailing and told local officials Thursday to promote the booming industry, confirming the legal status of Uber Technologies Inc. and local competitors, following run-ins with regulators.
The Cabinet document sets guidelines for registration, fares, employment of drivers and payments. It says that details for each city will be decided by local authorities, who are told to "encourage, support and guide" the industry.
China is one of a series of markets where Uber and competitors have grown fast but have faced legal challenges to their business model, which lets customers summon a car using a smartphone app. Uber's offices in several Chinese cities were raided last year by police who accused it of operating unlicensed taxi services. Taxi drivers have protested over competition from such services.
Regulators last year banned Uber and Chinese competitors led by Didi Chuxing from using drivers without taxi licenses. The services adapted by working through vehicle-rental companies.
On Thursday, Uber and Didi Chuxing said they welcomed the rules and the official endorsement of the industry. "The rules legalized online car-booking services at the national level for the first time, marking a milestone in China's endeavor toward steady and healthy development of the rideshare industry," Didi Chuxing said in a statement. "We believe the rules will usher in a new stage of growth for China's online ride-booking ecosystem."
The new rules are less restrictive in some ways than a proposed draft that was issued last October. The document issued Thursday said authorities would consider different types of labor agreements with drivers, while the earlier proposal would have required companies to sign contracts with them as full-fledged employees. The latest version also dropped a proposal to limit drivers to working for no more than two ride-hailing companies.
Uber, headquartered in San Francisco, operates in more than 60 Chinese cities and plans to increase to more than 100 by the end of 2016. "We look forward to working with national and local governments to put these regulatory guidelines into practice," said a company statement.
Didi Chuxing, previously Didi Kuaidi, operates in some 400 Chinese cities and said it completed 1.4 billion rides in 2015. In June, the company said in June it had raised $7.3 billion from investors in what it described as one of the world's largest private equity funding rounds. That included $1 billion from Apple Inc., which became a strategic investor alongside Chinese e-commerce giant Alibaba Group and Tencent Holdings Ltd., an online games and entertainment service.
Other investors include China Life Insurance Co. Last September, the company and Lyft of the United States agreed to link their services to allow travelers to use them in each other's markets. In December, their alliance added India's Ola and Southeast Asia's GrabTaxi.