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Beijing has given the green light for Uber Technologies Inc. and its Chinese ride-hailing rival to operate legally in the country.

China on Thursday issued nationwide ride-hailing regulations, making it the largest country to formally legalize the sector at a national level. Uber continues to clash with regulators around the world, and it pulled out of Budapest this month citing onerous government restrictions.

The Chinese ride-hailing regulations are greatly eased from a draft version from last fall, with the likes of Uber and its rival Didi Chuxing Technology Co. allowed to operate as long as they apply for and receive licenses for their companies and drivers.

The rules, to be adopted in November, do forbid operations below cost, ruling out a return to fierce subsidy battles like last year's between Uber and Didi. Both companies have spent huge sums to win drivers and riders to their services in China, while attracting billions in investment. Apple Inc. said in May it would invest $1 billion in Didi.

The previous draft of the regulations would have forced Uber and Didi to operate like traditional taxi companies, subject to government-set fares, car quotas and other heavy restrictions. These requirements have been struck from the final version, although local governments are allowed to set minimum and maximum fare prices.

China Vice Minister of Transport Liu Xiaoming said at a press conference Thursday that regulators decided to allow ride-hailing companies to operate more freely after input from industry stakeholders.

"This was partly in respect of the public's opinion," he said.

The rules come as a victory for Didi and Uber, which both mounted intensive closed-door lobbying campaigns over the past year with regulators, according to people familiar with the companies. But in contrast to Uber's outspoken conflict with western regulators, both praised Chinese regulators publicly throughout the process.

Didi and Uber both said Thursday they welcomed the regulations and were prepared for implementation.

At stake is the world's largest market of urban commuters, which has huge growth potential. At 750 million people by some estimates, the market is more than twice the total U.S. population and includes 25 cities more populous than Los Angeles.

Under the new rules vehicles must be retired from ride-hailing use after eight years but can still be retained by their owners for personal use. Ride-hailing vehicles that reach 600,000 kilometers are no longer allowed on the road for any purpose.

This is more friendly to private car owners than the draft regulation, which would have banned ride-hailing vehicles from the road after eight years regardless of mileage.

Ride-hailing drivers must have at least three years' driving experience and cannot have a record of drunken driving, violent crimes or drug charges.

The initial draft would have restricted drivers to working for only one ride-hailing provider, but this restriction was removed in the new version. Private carpooling with multiple passengers was also exempt from the rules.

Write to Eva Dou at eva.dou@wsj.com

(END) Dow Jones Newswires

July 28, 2016 12:25 ET (16:25 GMT)

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