The authorities are expected to issue interim regulations on car-hailing taxi operations soon.

The head of the Shanghai municipal traffic commission, Sun Jianping, said recently that car-hailing taxi services, traditional taxi services and rental cars had complementary advantages and should be able to coexist harmoniously.

Sun stressed that the authorities intend to crack down on "black cabs" rather than car-hailing services during an interview with Xinhua News Agency. However, it is illegal for private cars to operate as taxis according to the current regulations.

According to the traffic commission chief, Shanghai will issue business licenses to car-hailing operators should they satisfy certain conditions such as having enough registered capital and their Internet servers in China.

Analysts say it will be difficult for the major car-hailing operators to apply for the license and the policy will allow them to act as a taxi service.

After receiving their operating licenses, the car-hailing companies will have to pay tax and purchase the necessary insurance and the driver will have to go through training. These will push up costs, which will likely be passed on to users, meaning the traditional taxi services will be better able to compete with them.