Phantom rides leave Uber drivers in a quandary

But even at that level, it could still mean substantial financial losses for the company. According to the figure disclosed by Uber founder Travis Kalanick in a letter to investors, about 3 percent of daily bookings means that there are 30,000 fake orders on Uber every day.

Uber has lowered the bonuses it gives out for each trip to 30 yuan from 50 yuan. But even with that figure, the company's daily losses from phantom trips could exceed 2.7 million yuan.

But the waste of money and resources is only one of the ramifications of the fake trips.

"When drivers are occupied with this mouse-and-cat game, users who are in real need of the service get neglected," Zhang said.

In 2013, Uber entered the Chinese market, with services in Shanghai. A year later, it won a $600 million investment from Baidu Inc, the nation's search engine giant. Currently, its services are available in 14 cities.

But according to data from Analysys International, Uber has just 11 percent of China's car-hailing market. It is a distant second to Didi Kuaidi. The market share for the Beijing-based company is about 78 percent.

Industry sources said the phantom rides have disrupted business for Uber drivers who refuse to participate in the scheme.

Liu Quanfeng, a construction-worker-turned-Uber-driver, said he was planning to shift to a new job because of the recent explosion of fraudsters on the platform.

"Last week, Uber sent me 31 booking orders but I only picked up 11 passengers. About 70 percent of the bookings were canceled even before I picked up the phone," Liu said. "They are faking orders."

According to Uber policies, when the cancelation rate exceeds 55 percent, drivers are not entitled to subsidies from the company.

"This really irritated me. If Uber can't fix the problem, then I will remove the app from my phone," Liu said.

Amid rising complaints, Uber has stepped up efforts to crack down on the practice.

Uber spokeswoman Huang Xue said: "Any driver or passenger who is caught cheating on Uber will be forever banned from the platform."

The company has also partnered with Taobao to close shops selling modified smartphones. But the big vendors who are deleted from the e-tailing site often return with another name and some of them are moving businesses to WeChat, a popular instant messaging service offered by Tencent.

"Uber has to balance between giving out incentives and clamping down on fraudulent practices." Zhang said. "As long as there is subsidy, it will be impossible to root out fraud."

Ma Si contributed to this story.