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10 May, 2015

In China, right balance needed between traditional and online taxi firms

By Xin Zhiming

Beijing, (chinadaily.com.cn) 2015-05-06 – US-based taxi app provider Uber has been frequently hitting the headlines in recent months for being the target of regulatory crackdowns or law suits with regulators and taxi companies in a number of cities outside the US. In the latest incident, its office in Guangzhou, South China’s Guangdong province, was raided in late April by police, and transport, industry and commerce authorities, casting a shadow on its operation in the world’s largest consumer market.

Right balance needed between traditional and online taxi firms

A file illustration picture shows the logo of car-sharing service app Uber on a smartphone next to the picture of an official German taxi sign in Frankfurt, September 15, 2014. [Photo/Agencies]

According to media reports, regulators seized iPhones and documents from the Uber office for its failure to abide by taxi management rules. The ride-sharing service provider allegedly hires unlicensed private vehicles for business, which is illegal in China.

The seizures have sparked online protests from regular users of Internet-based taxi-hailing services. And the move will pacify unhappy taxi drivers who serve traditional taxi companies.

Since the emergence of online taxi-hailing app companies last year, many taxi drivers have complained that their incomes have been slumping. In some cities, some of them even stopped operating and blocked the roads, raising concerns of regulators over social stability.

Apparently, such concerns have something to do with the decision-making of Guangzhou regulators.

Uber, however, is not the sole target of regulatory crackdowns. China’s two market-dominating taxi-hailing app companies, Kuaidi Dache and Didi Dache, have also been subjected to regulatory checks after their fast expansion led to protests from taxi drivers in some cities. The regulatory clampdown is obviously targeted at the taxi-hailing and ride-sharing businesses, which in the Internet era have brought convenience to consumers and optimized market resources but “moved the cheese” of traditional taxi companies.

If Uber’s operations in China are indeed problematic, such as engaging unlicensed private vehicles, it is fair for the company to be punished in accordance with China’s laws. But such Internet-based companies should by no means be pressured to shut down to serve the interests of traditional taxi companies. Regulators should realize that such companies benefit consumers and society as a whole by providing convenient services and rebalancing social resource distribution.

Therefore, their growth should be encouraged and the right balance struck to ensure the healthy growth of both taxi-hailing app providers and traditional taxi companies.

Because of strict control of taxi licenses in some cities, such as Beijing, the traditional taxi services have failed to meet market demand. It has become very difficult for commuters to hail a cab during rush hours, which has triggered widespread complaints.

Moreover, traditional taxis are often criticized for poor services, not least because cabbies sometimes ignore passengers hailing them. The taxi companies, on their part, have to do little to benefit hugely from their operations because taxi drivers are required to pay a big portion of their incomes to them as a precondition to join the profession (in Beijing and many other cities, individual taxi operations are not allowed).

It has long been suggested that the traditional taxi sector be liberalized to allow individual operators, so that taxi drivers need not pay the so-called fenqian (or portion money) to their managing companies. Moreover, in a liberalized environment, more drivers can enter the market after going through the proper regulatory procedures. And with increased competition, services can only improve.

But with such reform difficult to implement, the emerging Internet companies have seized the opportunities offered by poorly performing traditional taxi companies.

Instead of throwing cold water on Internet-based innovative companies, the regulators should help them address their operational irregularities and abide by local regulations while accelerating the management reform of the traditional taxi service sector.

Regulators will certainly need more time and energy for this, but their efforts will be worth the trouble because they will add vigor to the economy and make social resource distribution more efficient.

The author is a senior writer with China Daily. xinzhiming@chinadaily.com.cn