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China finally legalizes and issues guidelines for online cab-aggregation services

Good news for Chinese ride hailing corporations! The government of China has launched a slew of guidelines for cab aggregators to follow. The recently announced national guidelines will aim to set up a standard that will make cab operations, officially legal across the country.

The news comes in wake of cabs across China operating in the region between white and black. While Didi, Uber and others all have drivers operating in the country, it was not uncommon for the police to impound their cars and drive out passengers on a regular basis. This happens because cab aggregation — strange as it may sound — had absolutely no concrete, government defined guidelines to follow.

The guidelines come as a government attempt to break the established status quo and change how cab aggregation operates in the country — which ironically enough, had no clear rules in place despite being one of the largest global markets for cab hailing services. The major points of the upcoming rules, which will have to be strictly adhered to in order to run a cab aggregation service, are as follows:

  • Online car booking services will be made legal.
  • All drivers must first install safety features in their cars.
  • People signing up to become a driver for Uber/Didi/others can not have a criminal record.
  • The government will encourage development of a sharing economy and online car booking and non-cash payments.
  • Drivers must have a minimum of three years of driving experience to work on a ride-hailing platform.
  • Cars cannot have more than seven seats and must be retired from service after reaching 600,000 km.
  • User information and data collected by car-booking platforms must be stored within China and for at least two years.

All of the above have been major points of contention until now due to the government’s ambiguous stand, allowing these companies to run without ever defining a clear set of rules for them. However, since rules are enforced by local authorities, no clear set spanning China ever emerged. With the above though, the Chinese government has definitely made a start.

Speaking on the topic, Didi Chuxing said,

As a member of the rideshare community, DiDi welcomes the government’s endorsement and encouragement of the industry and China’s emerging sharing economy. We believe the Rules will usher in a new stage of growth for China’s online ride-booking ecosystem and that DiDi is prepared to meet these new requirements.

Uber similarly welcomed the new move, stating that,

Uber is already operating in over 60 cities and we plan launch in another 30 cities in the next few months. By the end of this year, we aim to be in over 100 cities. In every city where we operate, riders, drivers and city planners embrace the benefits that Uber’s platform offers. We look forward to working with national and local governments to put these regulatory guidelines into practice.

However, the companies are worried by the fact that these new policies will require cab hailing companies to get new license for their business and make sure that all the rules are adhered to. The task of enforcing these policies actually falls upon local authorities and Didi has requested them to adapt a market driven strategy for the same.

We noticed that the Rules require, in general principle, local taxi administration authorities to manage the platform licensing application process, and a certain discretion is granted local governments to determine the detailed operating requirements. We call for local authorities to adopt market-driven approaches that encourage innovation and new business models in order to continue serving the real needs and interests of our ecosystem participants.

In a nutshell, the companies are worried about their businesses being adversely affected while they go about implementing the changes. A valid worry — as seen in the case of Karnataka govt. — but the headache is certainly worth going through if it makes sure that the cab operators are able to operate within a well-defined legal framework. The draft is at least significantly better and laxer than the previous one which — according to some sources — had included government control on number of licenses, commercial license for operating as a cabbie and even local offices in individual cities.

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China finally legalizes and issues guidelines for online cab-aggregation services


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