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China Legalises Online Ride-hailing Services

China unveiled its plan to reform the taxi industry on 28 July. Apart from outlining the measures to be taken to revamp the management and operation of the traditional taxi sector, the plan also makes clear that cars offering rides on app-based platforms should be registered under the ride-hailing passenger transport service category. In other words, it confirms the legal status of online ride-hailing services.

The General Office of the State Council published the Guiding Opinions on Promoting Sound Development of the Hire Car Industry through In-depth Reforms on 28 July. The document details the principles of such reforms and major initiatives to be taken to overhaul the domestic taxi industry, covering such aspects as clarifying the positioning of the taxi industry, carrying out in-depth reforms in the traditional cruising taxi sector, regulating the development of the online ride-hailing and private car ride-sharing business, and creating a better market environment. Meanwhile, the Interim Measures for the Administration of the Operation of Online Hire Car-booking Service promulgated by the Ministry of Transport (MOT) provide specific measures for the management and operation of online ride-booking and taxi services.

China is set to revamp the traditional cruising taxi sector. According to the Guiding Opinions, the rights to license a taxi for hire should be free of charge and have a validity period. For existing taxi licences without a validity period or for which the driver is required to pay licence fee, the municipal government should enact a plan for gradual transition to the new regime. A business model under which operational risks are borne by both taxi service operators and drivers, and under which revenues can be shared reasonably, should be developed. Taxi contract fees should also be set at reasonable levels and allow for dynamic adjustment. Excessively high contract fee and bond money should be lowered.

In a press conference held by the Information Office of the State Council, Liu Xiaoming, vice-minister of the MOT said that the two recently released documents, i.e. the Guiding Opinions and the Interim Measures, took into account the characteristics of the new online ride-hailing sector, setting out an innovative regulatory regime featuring scientific licensing requirements and streamlined licensing procedures.  

According to the reform plan, app-based ride-hailing platforms will be required to bear the responsibilities of a transport service operator. They must ensure the legality of the vehicles and drivers they provide and the consistency between their online and offline operations. They must not collect, use or disclose the personal data of passengers in violation of regulations. Given the part-time nature of some drivers, app-based ride-hailing platforms may sign some form of labour contract with their drivers stipulating for example the working hours and frequency of service.

Besides, cars offering rides via online platforms will have to be scrapped mandatorily when they reach an aggregate mileage of 600,000km. Those which have travelled less than 600,000km but reached an eight-year service limit must also exit the market.

As for the streamlined licensing procedures, ride-hailing platform operators will be required to apply for a permit for their online operation from the relevant provincial authority in the province where they are registered. This permit is valid throughout the country. As for the offline part, i.e. the provision of actual services, platform operators will need to obtain a licence from the relevant authority in the city where they provide such services. This arrangement takes into account the trans-regional nature of app-based services on the one hand, and meets platform operators' requirement to offer localised services on the other.

For details of the Guiding Opinions in Chinese, please see:

http://www.gov.cn/zhengce/content/2016-07/28/content_5095567.htm

For details of the Interim Measures in Chinese, please see:

http://www.gov.cn/xinwen/2016-07/28/content_5095584.htm

Content provided by Picture: HKTDC Research
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