China just threw a major wrench into Uber's biggest expansion plans

Uber’s plans to expand in China may be about to hit a roadblock.

China’s Ministry of Transport has just issued draft rules that could pose big problems for the ride-hailing service’s efforts in China, according to a report in the Wall Street Journal on Sunday.

The new draft rules would significantly tighten the regulations that ride-hailing companies such as Uber and local rival Didi Kuaidi must adhere to, requiring the services to shoulder many of the costs of traditional taxi companies.

That could be a big problem for Uber, which has apparently declared China its most important market outside of the US.

Among the proposed rules are requirements that drivers of ride-hailing services have at least three years of experience and that drivers work only for a single ride-hailing company. Ride hailing companies would have to register their cars as taxi services, insure vehicles and passengers and sign labour contracts with drivers.

The companies would also need to maintain servers in China and share data with local transportation authorities.

Not yet finalised

The rules could well change before they are finalised, and it’s not clear what the timeline is for implementing a final version of the rules, the report notes.

The rules could also add clarity to the ride-hailing business in China, which the report says currently operates in something of a grey-zone. But the prospect of tighter oversight in China could also be bad news for Uber, which has aggressive plans to expand in up to 100 additional cities in the country in the next year, the report notes.

And it represents the latest regulatory challenge to Uber, which has attained a whopping $US51 billion valuation on investor expectations that its low-cost model and convenient technology will allow it to upend the taxi industry. The company is facing a class action lawsuit by drivers in the US seeking to be treated as employees rather than independent contractors, and politicians in countries from France to South Korea are threatening to crack down on its service.

Uber has apparently already placed servers in China, as part of its earlier effort to obtain an internet service company licence in China, according to the Wall Street Journal report.

We’ve reached out to Uber and will update if we hear more.

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