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China's new app law drives away unlicensed taxis

The crackdown on unlicensed drivers has been made official in China, with changes to how taxi apps are allowed to operate.

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The Didi Dache app. Didi Dache

In a bid to stabilise and fine-tune the country's thriving taxi app industry, China's Ministry of Transport has ordered all taxi-hailing apps operating in China to exclude private vehicles from their app platforms. This means that private cars and drivers without taxi licenses are no longer able to use apps such as Didi Dache, Kuaidi Dache and Uber for profit.

While the call for stricter taxi regulations has been heard for some time in China, this nation-wide policy came Thursday only after several municipalities had already decided to ban private cars and drivers from using taxi-hailing apps. Such apps saw a total of 154 million users in China alone during the third quarter of 2014. Currently, Beijing joins Chinese cities Shanghai, Nanjing and Shenyang in enforcing the new regulations.

While the regulation does not specifically target any app or company, apps that use private fleets, such as Uber, are expected to take the largest hit. Despite their constant struggle to maintain their operations in Asia, Uber China's spokesperson has come forward to explain that its services are not negatively affected -- as Uber Black and Uber X use fleets of limousines and licensed cars from taxi companies within China, rather than private vehicles.

However, the new transport policy drew criticism from various Chinese news outlets and media commentators due to the dismal state of taxi supply in China, which led to the prevalence of unlicensed hire car services in the first place.

Currently, the Didi Dache app, backed by investment company Tencent, and Kuaidi Dache, backed by e-commerce giant Alibaba, dominate the Chinese taxi app industry, with approximately 95 percent market share split between the two China-made apps. Despite the stiff competition, Uber recently received investments from Chinese search engine Baidu, granting them the much needed exposure and support in the nine cities it operates within.