China’s New Ride-Hailing Rules Focus on Where Drivers Call Home
BEIJING —Fresh from school with a degree in hotel management, Luo Haichao left his hometown and moved to Beijing to look for a bigger paycheck. He eventually found one in a different sector: driving cars. China has created its own local versions of Uber and Lyft, and the ride-hailing business is booming.
But now Mr. Luo — and potentially tens of thousands of other drivers — will have to get off the road.
Citing safety and other issues, the cities of Beijing and Shanghai said on Wednesday that Chinese ride-hailing companies must stop using out-of-town drivers like Mr. Luo and hire only local residents to sit behind the wheel.
“It makes me feel sad,” said Mr. Luo, 29, who works for the ride-hailing companies Didi Chuxing and Yidao Yongche and had just spent about $36,000 on a new Volkswagen Passat to give his passengers a more reliable ride. “Without people who come from the outside, Beijing wouldn’t have developed so fast.”
The new rules could deal a significant blow to Didi Chuxing, China’s ride-hailing giant, and smaller rivals that must now find new — and probably more expensive — drivers in two major markets. Didi Chuxing had just defeated Uber in an expensive battle for dominance in the world’s largest ride-hailing market, and it enjoys such a high global profile that it counts Apple and other big names among its investors.
In a statement, Didi said the rules represented a “significant step toward a more sensible and liberal framework,” and were less limiting on pricing, cars and driver restrictions than earlier drafts. A spokeswoman declined to comment on how the Beijing and Shanghai residency requirements for drivers would affect its business.
China’s technology boom has put the country on the innovation map and transformed the lives of many of its nearly 1.4 billion people. But even the new parts of the Chinese economy depend in part on the same old fuel that powered the country’s rise for decades: cheap labor from the countryside.
Those workers — now totaling nearly 280 million, including Mr. Luo — leave their farms, villages and smaller cities to seek factory jobs and better lives in the big cities. Their hands, low wages and willingness to work helped make China the world’s factory floor.
Increasingly, many of those workers do the grunt work behind China’s internet success stories. They drive cars for Didi Chuxing and Yidao Yongche, deliver packages for Alibaba Group and JD.com, and fetch takeout meals for Koubei and Eleme. Without them, China’s thriving e-commerce industry could take a significant hit.
But the new ride-share regulations show that the technology industry in China is coming up against long-held concerns in the country about overcrowding, a widening wealth gap and access to education, health care and 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. The political power of China’s taxi services — which see ride-hailing companies as dangerous rivals — presents a particularly strong challenge, he said.
It is not clear how many drivers would be affected, but the numbers could be significant. In Shanghai, for instance, fewer than 10,000 of the 410,000 active drivers registered to Didi Chuxing have permanent residency papers, according to Didi. Also on Wednesday, the southern boomtown of Guangzhou joined cities that had previously instituted less-restrictive residency requirements. In its statement, Didi said the city of Beijing had given it five months to implement the rules.
Officials in Beijing did not respond to requests for comment. But they were quoted by local news outlets citing safety concerns and a need to track drivers, as in the case a year ago, when a 28-year-old Beijing ride-share driver made headlines when he punched a drunk passenger, breaking an eye socket. The officials were also mentioned as citing local regulations already in place that require taxi drivers to be residents of the city where they work.
At issue is China’s unique household registration — or hukou — system, which was intended to keep rural workers from flooding into more populous regions. The larger cities, like Beijing and Shanghai, need a steady influx of people like Mr. Luo to function.
But residents or officials often push back, worried that migrants could swamp schools, hospitals and other services. Chinese cities have long struggled with how to square the need for migrant labor with the hukou system, and the country is slowly moving toward making it easier for migrants to establish residency.
The ride-hailing business poses especially tricky concerns for local governments. Taxi drivers, who are required to be local residents, feel threatened.
That has discouraged some ride-share drivers. “There are fewer and fewer rewards,” said Wen Zhenjiang, 37, who worked for Didi and Uber in Beijing for nearly two years and is now looking for work driving trucks.
There are other reasons to leave. Driving full-time often means 14- to 15-hour shifts each day, sometimes overnight if there is strong demand. Most drivers rent vehicles, but some — like Mr. Luo — bought their own after they started to make good money. To save on rent, many share apartments in the suburbs.
Their employers don’t keep tabs on how often the drivers work or require them to reach driving quotas. However, if they get bad ratings from passengers, they risk losing bonus payments.
Still, the rewards of getting into the ride-hailing business are clear: Mr. Luo has occasionally earned about $4,350 in a month, or three times more than the average Beijing office worker.
On Wednesday, online groups devoted to ride-share drivers were filled with messages of anger and disappointment. Many said they would return to driving illegal taxis. ”That will probably make me more money,” wrote a driver named Xiaowei. Another, named Canyue, said, “Whatever the rule is, I will keep driving as long as I can still tap ‘start a service’ on my app.”
Mr. Luo has a lot at stake. He is married and has an apartment and a mortgage back home in Chengde County in Hebei Province. His living is a good one for someone with a rural hukou. He is still making monthly payments equal to about $290 on his car and paying the same amount on his mortgage.
“This is unfair to people from outside Beijing,” he said.
But his days in the business are probably numbered, he said on Wednesday. “If it isn’t allowed, I will stop driving,” he said. “What can I do? I can’t put all my eggs in one basket.”