China’s Regulatory Approach to the Sharing Economy: A Perspective on Ride-Hailing

By: Huiqin Jiang, Associate Professor, School of Law and Politics, Zhejiang Sci-Tech University, China & Heng Wang, Professor & Co-Director, Herbert Smith Freehills China International Business and Economic Law (CIBEL) Centre at University of New South Wales, Sydney

While the sharing economy brings significant social benefits in China, it comes with regulatory challenges that are novel and unpredictable. How should regulators handle these challenges? This paper offers fresh insights into the regulatory approach to the ride-hailing industry, the most comprehensively regulated sharing industry in China. A historical review identifies three regulatory approaches deployed to date: self-regulation, market-based regulation and government regulation. Self-regulation relies on the platforms with incentive to provide better service for greater profit, and to deal with sharing-specific challenges. Market-based regulation invites rivals to keep a watchful eye on other players, in order to enhance their market position by outperforming the competition. Both approaches are capable of delivering quick, and often innovative, responses to new challenges. Government regulation, on the other hand, came late and plays a neutral role. The rules there are mostly of the “old wine in a new bottle” kind; in other words, applying existing (old) rules to the new sharing economy. Certainly, those rules succeed to provide a level playing field for traditional and sharing-market players. However, the authors argue that government regulations are inadequate for solving sharing-specific challenges such as the legal status of the participants, the challenges of uncertain externalities, and new forms of competition. Instead, regulators should in the future give affirmative value to self-regulation and market-based regulation. These complementary approaches are capable of yielding innovative and sharing-specific regulatory responses, from which the government regulators can glean and evaluate before codifying them.

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