Taxi-hailing apps such as Kuaidi Dache and Didi Dache, rolled out by Alibaba and Tencent respectively, are gaining popularity among users. By connecting passengers with drivers, the two firms account for almost 99 percent of the market with 154 million registered users in more than 300 Chinese cities.

Apart from the taxi-calling functions, the apps also provide tailored ride service to commuters by dispatching luxury cars through cooperation with professional car rental companies.

In a cautious note, the Ministry of Transport said last week that it recognized such services, which it described as innovative and beneficial in meeting the diversified needs of consumers.

It added it would closely watch and study such market services, encourage innovation, and promote standardization. However, it ordered app developers to exclude private cars from their platforms and ensure that all vehicles are owned by taxi or car-rental companies on the basis of passenger safety concern.

Chen Xusen, an associate professor on e-commerce studies with the Beijing-based University of International Business and Economics, said the new services have mobilized more resources to participate in the market, bringing multiple benefits such as job creation and meeting growing demand.

He suggests authorities offer commercial operation licenses to the rental cars and draft market access standards that regulate both driver and rental company qualifications.

As the country sees a growing role for mobile and internet services, the taxi industry is the tip of the iceberg. Traditional industries, such as taxi services, must work with emerging industries and government regulators to adapt, Chen said.