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Business

Car-hailing companies thrive in China despite legal ambiguities

Chinese taxi-hailing service Didi Kuaidi has an app that matches passengers and drivers almost immediately.

GUANGZHOU, China -- Despite inhabiting a legal gray zone, taxi-hailing smartphone apps are wildly popular in China because they offer cheaper, faster rides for people looking for a lift, and a lucrative source of income for drivers.

     A 42-year-old housewife in the southeastern city of Guangzhou said she would never think of quitting her work with U.S.-based Uber Technologies because it pays so well. She registered in April as a driver for the ride-sharing service in hopes of earning a little extra cash. Now she makes up to 6,000 yuan ($966) a month, roughly double the average monthly wage in the country.

     Every weekday, she waits for fares in her Mini Cooper compact on the street downtown. Uber's software notifies her by smartphone that a customer in her area is waiting. She then calls the rider and arranges a pick-up point.

Drive my car

The work is essentially the same as that of a licensed cab driver, except that Uber drivers use their own cars. Problems with unpaid fares do not occur: Passengers pay through their smartphone apps. Now freelance taxi drivers are popping up across China, hungry for extra cash. Fares are paid to the driver's bank account within about a week. Some of the profit Uber makes comes from the investment income it earns during that week. A portion of the money is also rebated to customers.

     Fares are about half what a conventional taxi ride costs. The business model is also convenient for drivers, who can start work almost immediately after they sign up, so long as their cars are fairly clean and passengers are willing to use them.

     A 37-year-old former shop owner in Guangzhou has been registered with taxi-hailing service Didi Kuaidi, Uber's larger Chinese rival, for six months. He closed his shop and bought a Toyota Corolla compact to work full time as a driver. He said the 6,000 yuan a month he earns is more than he could make as a merchant, especially with the slow economy. "My car is neat, isn't it?" he said.

Uber underdog

Didi Kuaidi offers an array of transportation options, including bus service for smartphone users in Beijing and the southern city of Shenzhen. The company hopes to attract more passengers by operating bus routes in communities where municipal bus service is not available, and using highways when appropriate. It plans to have a few hundred bus routes in both cities.

     There is one cloud on the horizon: The government's policy toward the upstart services is unclear.

     Unlike incumbent public transportation services, cab-hailing services are at best semilegal under Chinese law. Uber is locked in legal disputes with authorities in many countries over licensing. Many expected the service would be banned immediately in China, but surprisingly it is still in business.

    Although some local governments have ordered Uber to suspend operations, no administrative action has been taken against Didi Kuaidi. Enforcement varies from city to city. As the cab-hailing apps have already caught on, Beijing may prefer to take a wait-and-see approach rather than upset city dwellers trying to get from here to there quickly.

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