Ownership of operating licenses become the focus of latest taxi strikes

Apart from skyrocketing fuel prices and high vehicle leasing fees, the ownership of taxi operating licenses is a long-standing problem that has been at the forefront of several taxi driver strikes and protests in the last few weeks.

The operating license is the often biggest single investment for taxi drivers in China, costing several hundreds of thousands of yuan. But the question of what happens to the license when the contact period expires has led to numerous and intractable disputes.

In mid-April, more than 1,000 taxi drivers in Kaifeng, Henan staged a strike to vent their anger over taxi companies’ plan to take back their operating license. In the same month, more than 100 drivers in the provincial capital, Zhengzhou, went to the municipal government with the same complaint. One driver told CLB that he spent 198,000 yuan for his taxi and operating license in 1996, and that the total taxi operation package, with the license being the most valuable item, was now worth 500,000 yuan. However his taxi company plans to take back the license from him without any compensation when the contract expires.

The license ownership issue has been point of contention in Henan since 2007, when around 13,000 taxi drivers staged strikes to protest moves by taxi companies to claim their operating licenses.

Similar disputes have occurred in other provinces too. In Chengdu, the provincial capital of Sichuan, about 140 taxi drivers staged a protest in February this year after being informed at the end of December that their license, purchased for between 300,000 yuan and 400,000 yuan in 2002, would reclaimed by government without any compensation and then be distributed to three local taxi companies.

For more than a decade now, local governments have been trying to regulate the taxi market by taking back taxi licenses from drivers, and renting them out to drivers or companies on a contract-base, usually for a five to ten year term. The idea is that the industry is easier to regulate if the operating licenses are leased by taxi companies rather than individual drivers.

In the free-wheeling city of Wenzhou however, the situation is different. A limited number of taxi drivers own the operating licenses in perpetuity, creating a complex and multi-layer system of contracting and sub-contracting. Taxi companies in this case become de facto taxi agents for the license owners, while at the bottom of the chain are the actual drivers, most of who are from other provinces, who have to pay a great proportion of their income to the agent or directly to the taxi owner.

There was a major sell-off of previously government owned licenses in Wenzhou between 1998 and 2000. Consequently, taxi driver’s monthly income in Wenzhou reportedly plummeted from 5,000 yuan in 1999 to 2,500 yuan in 2009. Taxi strikes in Wenzhou are not uncommon either. In 2009, for example, around 2,000 drivers staged a strike in protest at high operating costs and low income. And in March this year, there were another two taxi strikes in the city after fuel prices went up. Squeezed by multiple layers of fees, Wenzhou drivers are much more vulnerable to sudden increases in running costs.

Another problem of drivers’ owning licenses in perpetuity is the speculative market it can create. In the relatively small city of Tongliao, Inner Mongolia, for instance, the price of an operating license has reportedly gone up from around 2,000 yuan in 1997 to 200,000 yuan in 2009. And in Wenzhou, the price of a taxi license was said to be up to 1.4 million yuan.

As regulation gradually tightens in many jurisdictions, taxi drivers are struggling to retain their license rights. In Zhengzhou, the drivers started their campaign back in 2009, employing strikes and collective petitions to get the attention of government and garner public support. And in December last year, 124 of the drivers took their taxi company to court to prevent it from claiming their licenses.

The lack of any comprehensive regulatory system for the taxi industry in China is one of the main reasons we see so many strikes and protests but the attempts by governments to better regulate the industry have often created more problems as drivers seek to defend their rights and interests.

Taxi ownership and operation models in China

* In Zhengzhou, for example, the management fee for driver under Self-employed Type I is 100 yuan per month, for affiliated driver is 170 yuan per month. The leasing fee for contracted drivers is around 6,000 yuan per month. In Wenzhou, the fees for the driver under self-employed Type II are similar to contracted drivers. Under self-employed Type III, the driver will charge their partner a certain amount the leasing fee.