China’s government released draft rules to rein in the booming online taxi-hailing industry by putting formal regulation in place.

The proposed rules, which the public can comment on, will require ride-sharing firms to obtain a licence and guarantee a transparent pricing mechanism, Reuters reported. The new regulations will also require drivers to have road experience and will limit the number of seats per vehicle to seven.

China, like many other countries, has complained that car-hailing services operate outside existing laws and is taking steps to regulate the sector.

Didi Kuaidi, the largest ride-sharing firm in China with about a 95 per cent market share, is facing pressure from US-based Uber, which is investing heavily to gain market share. Uber reportedly raised $1.2 billion in an ongoing fundraising round, led by search giant Baidu, to expand in China, while Didi has raised $3 billion.

Uber China is preparing to apply for a licence, it said in a statement. It announced plans in June to expand its car-booking service into 50 new Chinese cities from 11. It started operations in China in February last year and said in June its business has doubled over the past month, with almost one million trips a day in May.

Didi runs two separate apps — Didi Dache and Kuaidi Dache — but has combined their technology and data after the two merged back in February. It operates in 360 cities, with as many as 1.5 million drivers, and claims more than 200 million users, who take about four million trips a day using the service.

Didi recently formed a strategic partnership with ride-sharing service Lyft to “make it easier for people to get reliable rides when they travel between the US and China”. The Chinese firm invested $100 million in US-based Lyft as part of a financing round led by Rakuten earlier this year that also included Carl Icahn, Alibaba and Tencent.