The Chinese Experiment: Lessons from the Regulation of Ridesharing in China

Abstract

Turning on an app, finding a driver nearby with the help of GPS, and quickly catching a ride to your desired destination is now a daily activity for many people around the world. This arrangement, known as “ridesharing” or “ridehailing,” has especially transformed the way many American and Chinese citizens travel. In the United States, ridesharing is roughly an $18 billion industry, and in China it is an incredible $30 billion. And while ridesharing for many Americans might be synonymous with Uber and Lyft, in China the leading ridesharing company is Didi-Chuxing, which facilitates more rides each day in China than Uber does across the entire world. The so-called “sharing economy,” of which ridesharing and similar services like homesharing are a part, has unlocked the excess capacity in cars, homes, and schedules, leading to lower prices for consumers, higher incomes for suppliers, and the reduction of wasted resources. Despite these benefits and advances, however, the sharing economy has created an array of problems for communities of all sizes — from tax evasion and pollution to price gouging, deplorable worker protections, and consumer safety. The impact of these problems is exacerbated because sharing economy platforms shape-shift, move fast, and fight to avoid or find loopholes within current regulatory frameworks. As a result, the world has witnessed a barrage of lawsuits, strikes, bans, and rules in opposition to this zeitgeist. With many differing approaches to regulating the sharing economy, some jurisdictions have more effectively mitigated the novel economy’s negative externalities than others. Thus, it is helpful to look at legal experiments occurring across the globe to identify and understand best practices as they emerge. This Article does just that by examining China’s ridesharing regulations. China’s approach provides a useful point of comparison to the U.S.’s, because of its national recognition of ridesharing platforms, its two-tiered regulatory structure, and forward-thinking plans to incorporate many of the sharing economy’s benefits into the country’s strategic planning. Furthermore, this Article contributes to our overall understanding of the Chinese economy and its legal system, which too often goes unexamined in U.S. legal scholarship, despite the fact that the Chinese economy is second only to the U.S.’s. This Article advances a two-pronged thesis. First, it argues that China’s approach to ridesharing regulation — while not flawless — nevertheless addresses certain policy concerns in a more rational and effective manner than have U.S. laws. Chinese law appears to balance the country’s goal of encouraging the positive attributes of ridesharing with other practical social goals such as consumer protection and fair competition. Second, this Article argues that U.S. regulators can selectively borrow from China’s approach to ridesharing regulation for the benefit of the relevant stakeholders in the U.S. In this way, U.S. law could absorb and encourage the beneficial innovations of sharing economy platforms generally and better address the policy concerns they provoke. To build these arguments, this Article proceeds as follows. Part I provides the context for understanding the broad similarities and differences between the U.S. and Chinese sharing economies, especially with regard to their incorporation into national economic and political goals. Part II provides a brief overview of ridesharing in both the U.S. and China. Part III evaluates the utility of comparative legal analysis and argues that the functionalist method of comparison is best suited for our purposes. Part IV provides a functional analysis of the two countries’ regulatory approaches vis-a-vis their respective systemic and substantive dimensions of interest. Finally, Part V provides key insights for regulators considering a national approach to ridesharing regulation in their own country.