China unveiled its first nationwide regulation on on-demand mobility (ODM) services Thursday, granting legal status to the industry.

A document released by the State Council, China's cabinet, featured guidelines on the registration and operation of ODM companies.

Previously, firms like China's Didi Chuxing and American counterpart Uber had operated in a gray area in China, as it is illegal for private cars to charge passengers for journeys.

The latest document specifies that ODM firms do not need to own their fleet, effectively allowing private cars to join the party.

Vehicles and drivers providing online-ODM services can apply for a license collectively.

ODM companies will be responsible for the qualification of their fleet and drivers, the document said.

A provisional rule released by the Ministry of Transport on the same day set out detailed requirements for ODM companies and drivers.

Cars are no longer allowed to offer rides after they clock-up 600,000 km or have been in use for eight years, while drivers must have no criminal record for drug, driving, alcohol or violent offenses, according to the rule.

It requires ODM companies to pay taxes and buy insurance for passengers, while banning them undercutting market prices, which it said would disrupt market order.

Didi Chuxing and Uber's popularity has been a source of ire among taxi drivers who must pay high franchise fees while competing with ODM services.

Thursday's document demanded taxi companies reduce high franchise fees and encouraged firms to provide online-booking services or merge with ODM companies.

About 96.6 million Chinese, or about one in every 14, hailed a taxi via online ODM services in 2015, while 21.6 million people booked private cars online, according to China Internet Network Information Center.

There are 1.39 million taxis across the country, carrying more than 100 million people per day on average.

Vice Minister of Transport Liu Xiaoming said China was the first country in the world to roll out national regulations on online ODM services, which are forbidden in most foreign countries including Germany and Japan.

He said the policy was made after thorough investigation and research and drew extensively on the views of various groups.

"Our principle is putting passengers first and meeting their demands [...] the bottom line is passenger safety and fair competition," Liu told a press conference on Thursday.

The latest policy was welcomed by both ODM companies and taxi operators.

Didi Chuxing released a statement calling the move "a milestone in promoting steady and healthy development of the ride-hailing industry."

The new policy shows the government's recognition and support of online ODM services, according to a statement from Uber.

"It's good for fair play between ODM and taxi services," said Jin Kai, spokesperson of a taxi company in east China's Zhejiang Province. "Now our drivers have more confidence in the industry."

The new policy has been welcomed by transportation experts and the public.

"The policy respects the laws of the market," said Guo Jifu, director of Beijing Transportation Research Center, "now ODM companies will have to play according to the rules."

Yu Mingyuan, a researcher with the Ministry of Transport, said the policy chimes with the Internet Plus economy, and it will push the taxi industry to improve their service.

Fu Weigang, executive director of Shanghai Institute of Finance and Law, called the new policy "a great step forward," but as it is currently only provisional, he said, there is still some uncertainty.

Meanwhile, while the regulation has left the pricing of ODM services to the market, it has also given local governments pricing power.

"Local governments will have to roll out more detailed policies," said Gu Dasong, a transportation expert with Southeast University, Nanjing.