Hong Kong police on Tuesday arrested 21 Uber drivers for carrying passengers without a proper permit following an undercover operation, in the latest setback for the ride-hailing giant.

The sting comes as the San Francisco company has encountered regulatory roadblocks around the world, despite its huge popularity, and after five Uber drivers in the southern Chinese city were found guilty of operating without proper licences in March.

Those drivers were arrested in a police swoop in 2015 after furious traditional cabbies smashed up their own taxis with hammers and called for authorities to act over unlicensed cars.

Police spokesman Edwin Lau told reporters 20 men and one woman had been arrested.

"We sent decoys on many trips, eventually we took all the evidence," Lau said, describing the undercover operation that took place earlier this month.

The drivers were arrested for illegally carrying passengers for reward and for not having third party insurance, he said.

Uber is the most prominent of several smartphone apps that are shaking up the traditional taxi landscape in cities around the world.

But it has faced criticism and significant resistance from regulators in several countries, who accuse it of unfair competition and a lack of standards.

"We are extremely disappointed by the police enforcement today. We stand together with the twenty-one driver partners and their families," An Uber spokesman said in response.

"Ridesharing should not be a crime. Hong Kong is an international city known for its embrace of global economic trends and new technologies, but current transportation regulations have failed to keep up with innovation," he said.

Uber also added that its ridesharing insurance policy complies with the city's legal requirements.

In April, Uber said it would relaunch its services in Taiwan with a new business model following a two-month hiatus on the island after sparring with authorities over legal issues.

In January, Taiwanese authorities hiked the maximum possible penalty to Tw$25 million ($816,000) per driver -- the highest in the world.

The company withdrew from the market a month later, criticising the government's actions for hindering innovation and calling on President Tsai Ing-wen to take action.

It was also fined in April for operating an illegal taxi service in South Korea, where the service had sparked angry protests from taxi drivers.