Uber and Didi investors can come out of hiding. The Chinese government has officially legalised a business into which they have pumped billions of dollars, despite the companies operating in a regulatory grey area.
Both business have welcomed the move, issuing statements in support of the "Rules on the Management of Online Car-Booking" document, which has been issued by China's Ministry of Transportation and six other government departments.
Didi says the rules "legalize online car-booking services at the national level for the first time" and "usher in a new stage of growth for China’s online ride-booking ecosystem."
Its statement breaks down the rules into components, all of which get the Didi seal of approval. Investors might be particularly interested to note the rules will allow "rideshare platforms...to set prices according to the market, giving greater autonomy to market forces, rideshare platforms and drivers."
Didi and Uber could now increase the cost of a ride for consumers and earn more commission, which is good news for investors, but less so for the millions of Chinese people who use these services every week.
Uber also backs the rules, although its short blog post begins with the caveat that implementation of the rules will be at a city or regional, rather than a national, level.
Didi also notes a related announcement - "Guidance on Further Reform and Healthy Development of the Taxi Industry". This encourages "integration" of the private driver ridesharing sector with the licensed taxi industry "to balance the interests of passengers, drivers, taxi companies, and P2P rideshare platforms".
It has earmarked RMB100 million ($15 million) for a development fund to kickstart this integration.
One obvious question to ask at this stage is whether or not the rules have any impact on the possibility of an Uber China/Didi tie-up, as widely reported last week.
On the one hand investors in both will be pleased to note that ridesharing is now legal (not that concerns over the regulatory grey area stopped them). Ridesharing (and other related products and services) are guaranteed to be part of the establishment. The size of the Chinese market means that there should be room for both to operate, perhaps even at some stage profitably.
On the other hand, the legitimisation of the sector at a national and governmental level removes one of the risk factors in a Didi/Uber China tie-up. It would be the dominant player in a massive market and as a result both boards might be interested in pursuing the matter.
Related reading from Tnooz:
Taxi app shake-up in Europe, Hailo brand to be phased out (July 2016)
Make peace, not losses – Didi and Uber backers talk truce (July 2016)
Apple pumps $1 billion into China’s Didi (May 2016)
NB Image by Romario len/BigStock