The cities of Beijing and Shanghai implemented new rules for the ridesharing app space this week, saying companies can no longer use out-of-town drivers for their services.
According to a report by The New York Times, officials in the cities said the ridesharing app companies can only hire local residents to drive their cars. NYT noted the new rules may hurt Didi Chuxing, the leading ride-hailing company in China, in a big way, as well as smaller competitors because they have to find local drivers in two different cities, which will likely cost them more. In a statement to NYT, Didi said of the rules that it’s a “significant step toward a more sensible and liberal framework,” noting the rules have less limitations on the pricing of the services, cars and drivers than previous drafts.
While the technology boom in China has put the country on the map, NYT pointed out the new rules governing these companies shows the technology industry is facing concerns about overcrowding, a wealth gap that is widening and accessibility to education, health care and a host of other services. “At the bottom of the conflict is tension between powerful vested interests and a new rising class,” said Hu Xingdou, an economics professor at the Beijing Institute of Technology, in an interview with NYT. He pointed to the political might of the taxi services in China, which see ridesharing apps as a competitive threat and have, as a result, put up a strong challenge to the burgeoning industry. It’s still not clear the number of drivers that will be impacted by the new rule, but the paper said it could be large given that, in Shanghai alone, less than 10,000 of the registered drivers for Didi Chuxing reside in the city.