Rules may lead to return of illegal taxis

A NUMBER OF CHINESE CITIES have released their draft plans on regulating car-hailing services, requiring drivers on ride-sharing platforms such as Didi Chuxing have a local household registration, or hukou, to stay in the business. Sconline.com.cn commented on Tuesday:

The proposed harsh restrictions on car-hailing drivers, especially the requirement they have a local hukou, have met bitter criticism. In a recent seminar hosted by Peking University, many leading economists said the higher thresholds for drivers would only serve to resurrect the illegal taxi services that had been hit hard by the emergence of Didi and Uber.

Such concerns are not without foundation. Some have complained that since the local governments issued their draft regulations it has become more difficult to get a ride via car-hailing platforms during rush hours. Worse still, illegal unregistered "taxis drivers", who rip passengers off or refuse to take them if the trip is short, seem to have made a comeback.

More than a dozen cities, including Beijing and Shanghai, have imposed tougher restrictions on car-hailing services under the name of "regulating the market". But it is the market that should play the decisive role in redistributing resources.

The rise of Didi and Uber in recent years, to a large extent, has optimized the urban transportation by purging illegal taxis from the roads. And both passengers and owners of underused vehicles have benefited from the sharing economy.

What cars are eligible to participate in the ride-sharing business should be decided by people's demand, not administrative orders. Taking a ride in non-fancy cars is not necessarily more dangerous, as the safety record of car-hailing services in the past years indicates.

Some have suggested that the higher thresholds for both drivers and vehicles are being introduced to protect traditional taxis from the dog-eat-dog competition. They may be right. It had been estimated before the new regulations were introduced that the value of the ride-sharing market would double this year. The average annual increase in the taxi sector is around 8.7 percent.

But many experts said it will be just a matter of time before the car-hailing services dominate the market. The authorities have to be careful they do not bring back the illegal taxis while seeking to manage the ride-hailing services.