Uber in­stalls server in China in ef­fort to meet new rules

China Daily (Canada) - - ANALYSIS - By FAN FEIFEI

fan­feifei@chi­nadaily.com.cn

The es­tab­lish­ment of Uber as a Chi­nese en­ter­prise on a lo­cal server doesn’t au­to­mat­i­cally qual­ify the com­pany for a busi­ness li­cense to op­er­ate as a tai­lored taxi ser­vice in China, an­a­lysts said.

Liu Zhen, the head of Uber’s strat­egy in China, said on Aug 12 that Uber has es­tab­lished a server in China to bet­ter deal with lo­cal cus­tomers, and will op­er­ate as an in­de­pen­dent com­pany un­der Chi­nese man­age­ment, funded with Chi­nese cap­i­tal, and that it will co­op­er­ate with ad­min­is­tra­tive author­i­ties to serve Chi­nese pas­sen­gers. She said Uber’s latest fundrais­ing plan is go­ing well in China and the com­pany will of­fer more de­tails at the ap­pro­pri­ate time.

By set­ting up a server in China, Uber ex­pects to be ap­proved and stand firmly on le­gal ground af­ter China passes a reg­u­la­tion on tai­lored taxi ser­vices. Once the reg­u­la­tion is passed, a move ex­pected soon, a tai­lored car ser­vice plat­form can ap­ply for a busi­ness li­cense.

Un­der the reg­u­la­tion, a tai­lored car plat­form must set up its reg­is­tered server in China, but Uber has been pre­vi­ously re­garded as hav­ing es­tab­lished its server out­side China.

Ex­perts said Uber still has a long way to go and must do more to get ap­proval from Chi­nese author­i­ties.

In­dus­try in­sid­ers said Didi Kuaidi, China’s largest tax­i­hail­ing app, Uber and other tai­lored taxi ser­vices plat­forms have ar­rived at a key turn­ing point of their growth, with tremen­dous op­por­tu­ni­ties and fierce com­pe­ti­tion.

Zhang Xu, an an­a­lyst at Bei­jing-based In­ter­net con­sul­tancy Analysys In­ter­na­tional, said that “for a for­eign carhail­ing plat­form to en­ter the Chi­nese mar­ket and to set up a server in China, it shows Uber has at­tached im­por­tance to ex­pand­ing its busi­ness in China”. Uber is now trans­form­ing from an as­set-light com­pany into an as­set-heavy firm by means of set­ting up servers, head­quar­ters and a man­age­ment team in China, he added.

The com­pany’s de­vel­op­ment in China has long been trou­bled. Uber’s Guangzhou and Chengdu of­fices were in­ves­ti­gated by author­i­ties for “illegal oper­a­tions” in April and May, sus­pected of or­ga­niz­ing pri­vate cars to en­gage in busi­ness ac­tiv­i­ties.

Zhang pointed out that set­ting up a server in China doesn’t mean Uber can be quickly deemed le­gal, even if the coun­try passes a reg­u­la­tion on tai­lored taxi ser­vices. “It is just the be­gin­ning, and Uber needs to make more ef­forts to get a qual­i­fi­ca­tion,” Zhang said. “China has a strict reg­u­la­tion about the ra­tio of for­eign in­vest­ment in China, which should not ex­ceed 50 per­cent. More­over, the stor­age, trans­mis­sion and man­age­ment of any busi­ness data and in­for­ma­tion should be within Chi­nese ter­ri­tory, and the cross-bor­der data trans­mis­sion and us­age will be for­bid­den.”

Liu, the head of Uber’s strat­egy in China, said she is look­ing for­ward to the up­com­ing reg­u­la­tion on tai­lored taxi ser­vices, say­ing: “It is a sig­nif­i­cant mile­stone for Uber’s de­vel­op­ment in China.”

Ac­cord­ing to sta­tis­tics from Analysys In­ter­na­tional, Didi Kuaidi ranked first in the sec­ond quar­ter of 2015, with an 82.3 per­cent share of the mar­ket, fol­lowed by Uber at 14.9 per­cent and UCAR — China’s largest car rental ser­vice provider — with 10.7 per­cent.

China In­ter­na­tional Cap­i­tal Corp es­ti­mates the po­ten­tial scale of the Chi­nese tai­lored taxi mar­ket to reach 420.5 bil­lion yuan ($65.7 bil­lion).

Analysys In­ter­na­tional in­di­cated that com­pared with the P2P (peer to peer) mode adopted by Didi Kuaidi and Uber, the tra­di­tional B2C (busi­ness to con­sumer) mode used by UCAR could ef­fec­tively avoid the reg­u­la­tions on tai­lored taxi ser­vices and gain an up­per hand in fu­ture com­pe­ti­tion.

He Xia, an ex­pert with the Min­istry of In­dus­try and In­for­ma­tion Tech­nol­ogy, said China has for­mu­lated strict ac­cess rules for for­eign tele­com busi­nesses, and Uber, as a global firm, needs to ob­tain an In­ter­net con­tent provider li­cense. The key to get­ting an ICP li­cense is that the con­trol­ling share­holder of a com­pany should be Chi­nese and lo­cated in China.

How­ever, the iden­tity of Uber’s con­trol­ling share­holder is not clear, which be­comes an ob­sta­cle for Uber to ap­ply for an ICP li­cense. More­over, the process of ap­pli­ca­tion of­ten lasts three or four months, he added.

Hu Dan, a se­nior an­a­lyst with the con­sult­ing firm iRe­search, said tai­lored taxi ser­vices were po­si­tioned orig­i­nally for high­end pas­sen­gers, boast­ing bet­ter ser­vice, while the or­di­nary taxi is aimed at or­di­nary cit­i­zens. So tai­lored taxi ser­vices should not threaten the or­di­nary taxi ser­vice, Hu said. How­ever, at present, some car-hail­ing com­pa­nies pro­vide high sub­si­dies for tai­lored taxi ser­vices, so the ef­fect on or­di­nary taxi ser­vices seems to make a big dif­fer­ence.

“We will see whether tai­lored taxi ser­vices re­ally shock the tra­di­tional taxi in­dus­try when high sub­si­dies are pro­hib­ited,” Hu added.

Hu is op­ti­mistic about the prospect of tai­lored taxi ser­vices.

“The rapid de­vel­op­ment of tai­lored taxi ser­vices has proven there is a huge de­mand from the mar­ket, and the up­com­ing poli­cies and spec­i­fi­ca­tions will make the tai­lored taxi in­dus­try be­come more nor­ma­tive, which is not bad news for tax­i­hail­ing plat­forms.”

PRO­VIDED TO CHINA DAILY

Uber ex­pects to be ap­proved and stand on le­gal ground af­ter China passes a reg­u­la­tion on tai­lored taxi ser­vices.

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