Cabbies in China are burdened with many problems, rising fuel prices being the most prominent among them. Three experts suggest ways to solve their problems.

You Chenli: Cut costs, do not raise fees

The recent taxi drivers' strike in Hangzhou, Zhejiang province, calls for attention. Like other strikes by cabbies in some Chinese cities in recent years, taxi drivers in Hangzhou resorted to take action to protest high oil prices, low earnings, and the high fees charged by taxi companies.

To deal with the issue, the local government has given taxi drivers two promises: to weigh the pros and cons of increasing fares by the end of October, and to grant a temporary 1-yuan ($0.155) subsidy for every passenger (or set of passengers) the cabbies take.

But the two plans, announced by the local government in a rush, are questionable. The first plan should have undergone public hearing and the second should have been examined and passed by the local people's congress before being announced because the funds for the subsidy will come from taxpayers' money.

It would have been better if the government had announced a possible cut in fuel prices for cabbies and asked taxi companies to reduce their fees. But reciprocally, drivers wouldn't have gone on a strike if taking such measures was possible. The reason: monopoly profit rules. The core of the problem lies in the government's restriction on the number of cab licenses, which makes taxi companies' business highly profitable because of lack of competition.

There was fierce competition, however, to get cab licenses. But as was expected, taxi companies with larger fleets, and thus more bargaining power than individual drivers, won the competition for licenses. These companies have established a monopoly (or rather oligopoly) since the 1990s, and began hiring drivers or renting out cabs to individuals for a monthly fees.

The monthly fees were always high but when they became exorbitant, rendered more unbearable because of other factors such as violation of drivers' rights, a strike was inevitable.

The direct cause of the latest Hangzhou taxi drivers' strike was the exorbitant monthly fees that cabbies are forced to pay. The city today has about 8,000 cabs, of which only a few are owned by individual cabbies. Typically, one car has two drivers, one for the day shift and the other for the night, each of whom can earn about 500 yuan a day. But a cabbie has to pay 220 yuan as fees to the cab company and another 200 yuan for gas out of the money he or she earns. A part of the remainder then goes to pay for the vehicle's maintenance and repair.

So any solution to the strike should first consider a reduction in the fees that taxi drivers are forced to pay. The next step should be to carry out fundamental reform, including the lifting of the administrative restriction on the entry of individuals into the sector.

However, one cannot help but ask why the local administration finds it so difficult to ask taxi companies to reduce their fees. After all, they could help transfer part of the monopoly profit to the government by doing so.

But surprisingly, even when drivers go on a strike, the local government prefers not to disturb the profit-sharing process. Instead, it chooses to raise taxi fares, grant subsidies or take other measures that will burden the public further.

Though the prospect of any marketization reform of the system doesn't look possible, there is hope that vehicles-for-hire could be allowed to operate as public carriers.

Introduced to New York in the 1950s and different from traditional cabs, vehicles-for-hire do not pick up passengers on streets but ferry people who make prior reservations over the telephone or through personal visits. Nowadays, making reservations has become more convenient because of the Internet. These vehicles' and their drivers' main features are their diversified, humane and convenient service. For example, vehicles-for-hire can be "community" cars that are available at nominal fares, for bigger occasions, people can book business vehicles called black cars, and if a person can afford, he/she can hire a limousine. This service is available in some Chinese cities, and it's time to spread it across the country.

The author is a researcher with a private think tank, Transition Institute, dedicated to social and economic research.