These Rules Could Derail Uber’s Progress in China

China is on track to become Uber’s largest market, but proposed regulations may slow things down.

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Oct 12 2015, 1:41pm

Image: bfishadow/Flickr

The Chinese government may have just thrown a wrench into Uber's plans for world domination.

Draft regulations would ban the use of private cars for online ridesharing services like Uber and Didi Kuaidi, a homegrown Uber-like service backed by WeChat parent company Tencent. Instead, drivers would have to be driving commercially licensed vehicles and would need to pass strict background checks. Drivers would also only be allowed to drive for one ridesharing platform at a time.

One analyst told Bloomberg that such regulations, if finalized, would be a "devastating blow" to the ridesharing industry in China.

The draft regulations are now available for one month of public comment, with rules expected to be finalized by the end of the year. Uber said it has been in "close communication" with regulators, and that it will "comply with all requirements."

To call China an important market for Uber would be like calling water important for the creation of life. The company has already allocated $1 billion to expand into China, with the company saying earlier this year that China was on track to become its largest market worldwide. In fact, as of June, three Chinese cities, Guangzhou, Hangzhou and Chengdu, had all surpassed New York City in terms of trips taken.

Of course, Uber has run into all sorts difficulties with regulators worldwide, particularly with respect to its UberPop service that lets unlicensed private drivers pick up passengers in their own cars. The company's offices have been raided in a number of world capitals, including Amsterdam and Paris, as it tries to convince regulators that it should be treated like a technology platform and not a traditional taxi company. Uber is also battling a high-profile California lawsuit regarding whether or not its "driver-partners" should be considered employees.