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China criticises subsidised ride-hailing apps as anti-competitive

Mon 14 Mar 2016

China’s transport minister has criticised the new wave of ride-hailing apps such as Didi Kuaidi and Uber of obliterating established taxi industries with massively-subsidised price cuts which are unlikely to be sustained once the ‘old guard’ has fallen.

Speaking to reporters on the side-lines of China’s annual parliamentary session in Beijing, Yang Chuantang told reporters: “The subsidies [to commuters and drivers] by ride-hailing firms are aimed at occupying more market share within the short term and is competitively unfair for the taxi industry. It is unhealthy and cannot be sustained in the long term.”

However the criticism comes in the context of pending legislation to legitimise the status of ride-sharing apps, which are enjoying such wild success worldwide as to force governments to either bring them into the regulatory fold or run rampant, leaving a continuing trail of protests and controversies.

Chuantang refuted the notion that government would take a centralist approach to the problem, recommending that local governments be given the power to regulate the services according to the needs of their cities and populace.

China’s Ministry of Transport Transportation Services Division Liu Xiaoming has also indicated [Chinese] at the session that extant Chinese taxi services should embrace the internet and consider reform.

The transport ministry sought out public opinion on new app-related regulation which was launched in October, leading to the confirmation of draft legislation which would require foreign-owned services such as Uber to operate servers inside China – and for all ride-hailing companies to be licensed and submit to government guidelines on what they can charge. The latter regulation is likely to impact the episodic progress companies such as Uber seek by manipulating ‘surge’ pricing or making regular special offers – price cuts which participating drivers, at least in the case of Uber, are obliged to opt into, despite increasing complaints from the Uber driver community.

Uber’s commitment to its future place in the Chinese market is fierce, with the San Francisco company currently ‘investing’ – or, if you prefer, losing – over $1 billion a year in China.

The ‘scorched earth’ ride-hailing offensive seems to be viewed by China the way many view the creation of food-deserts by expansive local supermarket companies such as Walmart and Sainsbury’s; or Amazon’s ‘monopolist practice’ of killing competitors only to raise prices.

Comment In broad economic terms, the fight in Asia between foreign invader Uber and native services such as Didi Kuaidi can seem like market economics driving down prices for consumers, with the sharing economy as an egalitarian force disrupting potentially overpriced and over-established local monopolies.

In effect, to use old Chinese imagery, it’s more akin to two squabbling dragons whose fight is decimating the landscape – and only one of which is likely to survive. Even if government and local legislation mandates against the inevitable re-emergence of a (now tech-heavy) taxi monopoly, the ‘favoured’ suppliers seem likely to form the same kind of effective cartel which many believe is the model of post-Thatcherite utilities in the United Kingdom – choice without genuine competition, or any of the price cuts which are currently bringing ride-hailers so willingly away from traditional taxi services.

Tags:

Asia China government news transport Uber
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