China's latest draft regulations on private car-hailing services may seriously harm companies such as Didi Kuaidi and Uber. The conservative draft, which requires car-hailing services to operate more like traditional taxi companies, has drawn opposition from legal and public administration experts. They have called for a more open attitude to these apps and the sharing economy in general.
Winter might be coming for car-hailing apps in China - if recent draft regulations on private car-hailing services put forward by China's transport authorities become a reality.
Despite vocal objections from experts, industry insiders and the public, the Ministry of Transport said those who support the new regulations outnumber those who object, according to its latest analysis of all the comments it has received in the past month.
The draft regulations have been open for public consultation since October 10, and experts, car-hailing companies and government officials have engaged in discussions over whether they will help regulate an industry that has long lacked clear legal standing, or nip an innovative industry in the bud.
At the center of the debate is a conflict between a traditional, State run system and a more self-reliant, decentralized Internet-enabled system. Most experts believe that the current draft, favoring the traditional taxi industry model, will land a severe blow on Didi Kuaidi and Uber, whose major source of service providers have been private cars and private car owners.
Take the wheel
Car-hailing services currently occupy a grey legal area in China. Although private taxis are technically illegal in China, they generally find it easy to operate despite occasional crackdowns from local governments.
The draft, if passed, will likely force such services to act more like traditional taxi companies - firms like Didi Kuaidi and Uber, will need to acquire licenses, sign employment contracts with drivers, register and set up offices in all the areas where their services are provided - which will significantly add their operating costs. They will also have to hand over their ability to set prices to local governments.
Drivers, on the other hand, will have to take government-organized tests. They will also need to register their cars as vehicles for hire. Under China's laws, this means their cars will have to leave the road after eight years of service. This will likely scare private car owners away from the car-hailing business as it significantly shortens their car's lifespan.
To obtain the qualification, drivers need to take two exams. One on driving principles and practical abilities, each lasting an hour. The latter exam involves car safety inspections and emergency rescue skills, among others.
"The authorities are still using an old mindset, that taxis are taxis and private cars are private cars, erecting a huge barrier between the two. Any private car has to obtain a taxi license before they can be hired," Zhou Qiren, Dean of the National School of Development of Peking University, told Caixin Weekly.
The regulations came just two days after Shanghai, long considered a pioneer in China's economic reforms, became the first city in China to give legal status to a car-hailing company. It issued a license to Didi Kuaidi, the leading car-hailing company in China, on October 8.
Shanghai's plans were virtually the opposite of the national draft regulations. The city would not set prices, nor would be require cars to register as vehicles for hire. The responsibility to screen drivers and cars is in the hands of Didi Kuaidi, rather than the government.
Didi Kuaidi said in an announcement at the time that it was also in talks with other city governments about getting licenses, and other car-hailing companies said that they were in talks with the Shanghai government about the possibility of receiving a license. This raised the possibility that car-hailing services might soon see an expansion in China as more cities follow suit and legalize them.
But the Ministry of Transport draft has put an end to this possibility. Sun Jianping, a Shanghai traffic official, later said that the city will strictly follow national guidelines, but will enact more liberal measures in areas where the local government has authority to do so. This means that Shanghai will suspend its current plan for car-hailing apps until the national guidelines are officially decided.
