Chen Gong: Get to the root of the problem

Problems related to cabs and cabbies have emerged in some Chinese cities. But surprisingly, the solution to the long-standing city management problem is not that complicated; it's more a question of whether city governments want to solve it.

The public transportation system in many cities gets subsidies from public funds. Last year, for example, the Beijing municipal government granted 13.53 billion yuan ($2.1 billion) in subsidies to at-grade and underground transportation systems to keep ticket prices low. City authorities have said they are supposed to grant subsidies to bus networks and subways. But they never considered giving subsidies to taxi drivers or companies until oil prices rose so dramatically. The reason is that taxi drivers are individuals and taxi companies run according to market rules while subways and bus networks are State-owned enterprises. Although being part of the public transportation system, they are treated differently from buses by city authorities because of prejudice.

Experts and media have suggested many solutions to the problem, but there has been no effort to help taxi drivers escape their predicament.

Some people have suggested reducing the fees that cabbies pay taxi companies. But since the fees are the basic source of taxi companies' income, a reduction could cause their downfall. In Shanghai, for example, if the fees are reduced to 300 yuan per taxi per day, the profit of the companies would drop to only 6 percent. Add to that the high cost of the dispatch system and other costs, you have a recipe for disaster. How can taxi companies survive in such a situation?

Others have suggested abolishing the dispatch system to lower taxi operating costs. But the system is essential for the operation of taxis. Individual taxi drivers may not need this system but that does not necessarily mean the entire industry does not need it. It is especially important for taxi companies in big cities.

Besides, the suggestion to encourage self-employed individuals to have their own taxis and phase out big companies is faulty, too, because the sector is supposed to be open and operates according to market norms without discriminative rules against entry of individuals or companies.

A more suitable practice would be to transform local administrative bureaus into associations to promote self-management and social security in the industry, whose membership should be open to groups and individuals both.

The shortsighted decision of many city governments to limit the number of self-employed taxi drivers is fraught with problems, too. Though the taxi industry's problems are complicated, an open market with an open policy could never be wrong. And raising taxi fares freely could be dangerous. If the increase in fares is not limited to a certain extent, it will create chaos, causing more inconvenience to passengers which would outweigh the benefits that taxi drivers get. Worse, the inevitable drop in the number of passengers after fares are raised would fail to increase drivers' income. This could lead to lose-lose situation.

Given the facts, the most feasible solution to the problem would be for local governments to grant subsidies to the taxi industry as a whole. As the windows to a city's service industry, taxi drivers who toil all day long deserve a better deal with a monthly salary of at least 4,000-5,000 yuan a month, because even a nanny who works fewer hours a day can earn 3,000 yuan or more a month nowadays.

Therefore, it is necessary that city authorities change their mindset from maintaining stability to building a system that will actively push forward a city's service industry. To solve the problem of the increase in costs, local governments could approach PetroChina and Sinopec, or even higher authorities, to reduce the price of gas for taxi drivers.

The author is chairman and chief analyst of Anbound Consulting.