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March 15, 2016

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Minister warns taxi-hailing companies over subsidies

CHINA’S transport minister yesterday warned online taxi-hailing companies over subsidies leading to unfair competition, as US giant Uber and homegrown rival Didi spend billions in their battle for market share.

Yang Chuantang did not name either firm and did not threaten specific sanctions, but Chinese authorities have issued huge fines in competition probes in the past, and his comments represent a warning shot to the upstart industry.

Ride-booking services, which connect customers with drivers through smartphones, threatens the old-style taxi sector — which often generates income for local authorities.

Both firms raised billions from investors last year as they try to secure their positions in the market, offering both drivers and passengers subsidies.

“The subsidies provided by some companies are a short-term move to grab market share and pose unfair competition to the traditional taxi industry in a certain period of time,” Yang said at a briefing.

“In the long run, (they) will harm the healthy and sustainable development of the market,” he said on the sidelines of the National People’s Congress.

Uber boss Travis Kalanick has said Didi is spending as much as US$4 billion a year on subsidies, something the Chinese firm — backed by Internet giants Alibaba and Tencent — dismissed as “wildly creative.”

He was reported last month as saying his firm was losing US$1 billion a year in China. A Uber spokeswoman declined to say by how much it was subsidising users in the country, where it is active in more than 20 cities.

In October, the ministry unveiled proposed regulations that analysts said could be a “devastating blow” to the online ride-booking industry.

The draft bars private cars from participating in such services, which, some people say, would force vehicles and drivers to be registered with the government. It also requires ride-booking companies to obtain permits from local transport and telecommunication authorities in order to conduct business, with foreign companies having to set up servers in China.

The period for public comments ended in November but Yang said that authorities were still “revising and adjusting” the details.

But he downplayed concerns that private cars could be forced out by the rules, acknowledging that car-hailing services were “welcomed by some passengers.”

Private cars will “be allowed to provide profit-making transport services” after going through “certain procedures” to make them legal, he said.

Didi, which says it has more than 80 percent of the Chinese market, said it was “deeply inspired” by Yang’s comments.

It had been calling for a “flexible, pragmatic” policy, it said in a statement, adding that it “applauds the ministry’s openness toward voices from the marketplace.”


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