China: Should You Drive In China Or Lease A Car And Driver?

Last Updated: 5 January 2018
Article by Bill Song

As China's economy has continued to experience economic growth at a rate unparalleled among modern economies, the country's GDP has expanded at a rate of nearly 6-7% per year for more than 20 years. The Chinese economic miracle doesn't have a comparison in modern times, as it has rapidly created an expanding middle class where none existed before. Indeed, a recent report by consulting firm McKinsey Consulting Group estimated that 6 percent of China's urban residents qualified as members of the middle class in 2010, while also estimating that more than half of the PRC's urban residents will be a part of this class by 2020.

The new Chinese middle class has come to expect the status symbols enjoyed by middle-class consumers in the Western world, car ownership among them. Car ownership in the country thus has grown at similarly astronomical rates to China's GDP as cars have become a status symbol to China's growing middle class. Nevertheless, there are a number of problems and issues that come along with car ownership aside from the simple cost of owning and maintaining the vehicle. First, there is the mandatory insurance that all Chinese motorists must carry under Chinese law. Second, China's world-class congestion and accident rates make driving a perilous and time-consuming endeavor. Third, there is legal liability if a driver causes injury or property damage to another motorist or other third party. Although some Chinese citizens and expatriate residents choose to hire drivers and lease cars to deal with both the legal and other issues associated with owning a car, doing so does not necessarily relieve these individuals of liability under Chinese tort law for injuries or damages suffered by third parties in the event of accidents. Nevertheless, for expatriates living in China, it has become nearly impossible to obtain a license plate necessary to legally operate a car in China. The process is time-consuming, expensive and arduous. Therefore, for expatriates, the solution may ultimately be to lease a car and hire a driver for what will often be a temporary stay in China.

Obtaining a License Plate

Contrary to driving an automobile in some other countries, purchasing a car is the easy part for a foreigner in China. However, in order to actually operate a motor vehicle in China, an expatriate must obtain both a license and a license plate. This can be extremely difficult, particularly in China's larger cities, where most expatriates are concentrated. Every major city has some form of virtual auction process by which license plates are sold annually. For example, Shanghai requires foreigners to hold a valid driving license, a visa valid for more than six months, and a Shanghai residence permit. Applications for license plates must be made through the local Vehicle Administrative Office. Even for expatriates who have taken these steps, Shanghai uses an auction system to sell its license plates, limiting the numbers available in order to stop the overabundance of vehicles in the city.

Beijing has a similar process. It requires that a foreigner residing in Beijing must have lived in Beijing for over a year, must not possess any "passenger cars" and must have an active Chinese driving license to apply for a license plate. In order to cut down on pollution and congestion, Beijing also carries out a license plate lottery system. If an applicant is lucky enough to win a plate in the lottery, they must pay a registration fee and a second fee to actually have the plate manufactured. Most major cities have gotten to the point where they follow Beijing and Shanghai's lead in only allocating a fixed number of license plates through an auction process. A good resource setting forth each major city's specific requirements is available here.

To complicate matters even further, despite the long odds of actually winning a spot in each major city's license plate lottery, the process of obtaining a license plate in China for an expatriate can also be extremely expensive. As previously reported by the American business magazine Businessweek, the fees associated with obtaining a license plate can often be just as expensive as some lower-end car models. Therefore, expatriates often end up paying twice the normal price of a car that a Chinese citizen would pay.

Required Insurance Coverages under Chinese Law

Like most countries, China also requires drivers to obtain an insurance before operating a vehicle on its roads. Known as compulsory vehicle insurance in the PRC, Chinese law requires that all motorists carry insurance that provides coverage for any injury or death or property damage to a third-party in case of a road traffic accident Under the compulsory vehicle insurance, the driver holding the policy is not insured for damage to his own car or for injury to himself or passengers. The second type of required insurance that motorists must carry under Chinese is referred to as the commercial insurance, which covers all related claims that are not covered by the compulsory vehicle insurance.

World Class Congestion

Congestion is the first and one of the worst problems associated with owning and driving a car in China. Congestion in the PRC has become, and will continue being, a big problem as additional vehicles clog the streets of Beijing, Shanghai, and many other mega-cities. One estimate put the number of vehicles on China's streets at 70 million in 2010, with that number increasing by nearly 15 million per year since then. Congestion in major cities has become so atrocious that some Chinese cities like Beijing are considering implementing congestion charges to enter the central area of the city, following the example of London and New York. This will make it even more expensive to own and drive a car for the average Chinese commuter, many of whom would be driving into the downtown of major cities like Beijing or Shanghai during rush hour when congestion pricing is at its peak.

A World Class Accident Rate

The accident rate in China is also another problem that Chinese motorists face. Accidents are becoming increasingly common on Chinese roads as congestion becomes ever worse. For instance, a report by the International Business Times determined there were over 200,000 fatalities from motor vehicles in China annually according to estimates by the World Health Organization. Notably, this was more than three times the estimate provided by the Chinese government officials for the same period.

The China Tort Liability Law

On July 1, 2010, China's Tort Liability Law (the Tort Law), which was passed on December 29, 2009, came into effect. The Tort Law is an amalgamation of existing laws concerning tort liabilities, such as the General Principles of the Civil Law, the Consumer Protection Act, the Law on Product Quality, the Environmental Protection Law, and the Transportation Safety Law. The goal of the Tort Law was to set the general principles applicable in Chinese tort cases, including motor vehicle or traffic accidents.

The remedies provided in Article 15 of the Tort Law include compensation for both physical and serious psychological harm. Compensation for physical harm includes medical expenses, transportation costs, and loss of income. In cases of disability, the damages include expenses for disability-related appliances and disability compensation. In cases involving a death, a close relative can bring the tort claim, and the damages include funeral expenses and death compensation. The Tort Law specifically provides that in the case of serious psychological harm, damages for mental distress can be sought.

Property damages are also available as a remedy under the Tort Law for an injured or harmed party. Property damages are decided by the damaged property's market value at the time of the tort or by a court in its discretion if the parties cannot agree on the amount of damage.

Is the Solution to Lease a Car and Employ a Driver?

One potential solution to some of these problems associated with owning a car in China can be found in the form of leasing a vehicle and employing a driver to get around China's congested roads. Leasing a vehicle and hiring a driver can offer advantages that typically do not accrue to those who own a car under Chinese law. For example, it would free up time spent in traffic for the passenger to do other things, such as work, talk on the phone or simply relax and read the newspaper. It also can be a particularly beneficial alternative for foreign residents in China, who need not go through the expensive, difficult and time-consuming process of obtaining a license plate for the privilege of simply sitting in traffic in Beijing, Shanghai or any of China's other major cities.

However, there are also barriers to this approach, both economic and legal. Although generally, a tortfeasor is liable for liabilities caused by his own conduct, which would mean that a hired driver would be responsible for the injuries or damages in accidents the hired driver causes, the Tort Law provides for vicarious liability in some instances. Some noteworthy vicarious liability scenarios that could impact someone who employs a driver are (i) an employer's liability for torts caused by its employees' execution of their work duties as well as (ii) the liability of a person receiving labor service for the harm caused as a result of the labor services by the service provider. Under both scenarios, if a hired driver hits or kills an individual in an accident, then the party hiring the driver could potentially be responsible for any damages or injuries caused by the hired driver.

However, leasing a car and employing a driver can also result in other expenses and headaches not associated with owning a car. Finding and employing a driver and the associated expense would be the first such issue that comes to mind. In addition, there is also the issue of having to rely on another individual's schedule, punctuality, reflexes, and instincts in the event of a danger on the road. Finally, leasing a car may not require a large amount of money to be put down at one time as in purchasing a vehicle, but it still requires regular fixed payments.

As with many things, whether to own a car outright or to lease a car and hire a driver comes down to what an individual prefers. The second alternative can have practical benefits, such as freeing up the time spent in China's horrendous traffic to do other, more productive things. It can also be a particularly beneficial choice for an expatriate who does not want to go through the rigmarole of having to purchase a vehicle, apply for a place in the license plate lottery and then pay the exorbitant fees required to purchase the actual license plate. Nevertheless, due to the vicarious liability principles provided for under Chinese Tort Law, the scenario of employing a driver may not relieve a party of legal liability in the event that a hired driver in a leased vehicle becomes involved in an accident and causes injury, death or property damage to a third party. However, for many expatriates, even this risk of legal liability may be preferable to an arduous process to obtain a license plate which ultimately might not be worth it, as many foreigners will reside in China for no more than several years at the most.

Originally published June 26, 2017

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions