The Shanghai city government has followed Beijing's lead and moved to restrict the usage of increasingly popular taxi booking apps.

A combined picture shows taxi drivers glimpsing their smartphones when driving their cars in Shanghai, Feb 26, 2014. [Photo/Xinhua]

The apps usually allow users to bid for cabs by adding an additional flat fare but they do so at the expense of cab companies that provide dispatch services to the cabbies.

It has also resulted in complaints that Shanghai passengers are having increasing difficulty hailing cabs on the street, because many refuse to pick up customers paying normal fares.

Instead taxi drivers cruise the streets with their eye on a collection of cell phones mounted on their dashboards running different apps, all searching for fare bids.

Chinese internet giant Tencent Holdings Ltd has developed a function in its popular Wechat messaging system that allows customers to book and pay for cabs using its e-payment mechanism, and refunds a portion of the fare to the user.

Analysts say the app was developed in part to help Tencent compete with rival e-commerce giant Alibaba for a share of the online payment market, which Alibaba's Alipay product dominates. Alibaba has also invested in a popular cab-hailing app.

Neither Tencent nor Alibaba immediately responded to requests for comment.

The new regulations, published on the website of the Shanghai Municipal Transport and Port Authority, bans the use of taxi booking apps by cab drivers during rush hour periods and bans their use entirely by private vehicles licensed for hire.

Drivers are also not allowed to use the apps while driving, and can be fined for refusing to pick up ordinary fares.

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