A pioneering step on opening China's taxi market

HANGZHOU - The eastern Chinese city of Yiwu announced it would gradually give up quotas for taxi numbers, vowing to support Uber-like taxi-hailing apps on Wednesday.

Such apps have been a topic of controversy in the city, with local authorities fighting to keep the market as it is.

But Yiwu's reform is deemed by many as a progressive step toward opening the taxi market, which is essentially a monopoly entrenched with vested interests and lacks transparency.

"The market-oriented reform, which deals with the shortage of taxis and high contract fees for the drivers, is the inevitable course towards the sustainable growth of the taxi business," said Zhou Rongxing, head of the city's transportation management bureau.

On Wednesday afternoon, the bureau held a public bidding for the establishment of five new taxi companies, the country's first bid for new taxi businesses.

A total of 76 bidders contested for five slots, which are allowed to run 450 new taxis and must have 8 million yuan ($1.3 million) in deposit for each company.

Lou Xianming, a local private businessman, was among the five to win the bid.

"I was excited to have the chance to participate," said Lou, who currently runs a passenger bus service.

Yiwu will not impose any restrictions on the number of taxi companies and taxis after 2018, said Zhou, adding that the market will play the decisive role in running the taxi business.

Six taxi companies currently run 1,330 taxis in Yiwu, which is the world's largest small consumer goods exporter and home to more than two million residents, 15,000 of which are foreign business people.

The state taxi management system is characterized by stringent market entry requirements and a cartel of taxi companies. Companies must pay operation license fees to the government, which are then transferred to taxi drivers who always complain they are asked to pay too much while passengers often find it difficult to hail taxis when they need them.

There has not been a single taxi added to the city since 2008.

The unchanged number of taxis and de facto monopoly of taxi companies led to declining service quality and public complaints.

Taxi drivers, who have to pay exorbitant contract fees, also lamented on their misfortunes.

"If the reform is not in place, we will not be able to run our business any more," said He Jun, a veteran driver in the city.