For those living in China, using ride-hailing apps Didi Chuxing and Uber has become a part of daily life. Which is why it might surprise some to hear they were illegal until a few days ago.
The services finally left the legal grey zone on Thursday, when a group of regulators announced new laws which will make ride-hailing legal under as of November 1st.
Until now, the services could’ve been shut down without notice, despite a fielding billions of dollars in investment, some from the Chinese government’s sovereign investment fund itself. While a blanket ban would’ve been unlikely, the government did use the legal distinction to periodically arrest drivers and stop the companies speaking at industry events.
The legalization comes with some draw backs for the companies. When the law comes into effect later this year drivers will have to have a recent car, three years’ driving experience, no criminal record and a license from a local taxi-regulator. It’s a comparatively soft set of regulations compared to earlier proposals, but it still raises the entry barrier for new drivers.
Both Uber and Didi Chuxing have poured billions into their China expansion efforts. Didi Chuxing sealed a $1 billion USD investment from U.S. tech giant Apple in May, following several large rounds from state and private investors. Uber’s China operation has committed over $1 billion USD a year to the market, engaging in an aggressive subsidies war with Didi.