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Administrative monopoly, market economy and social justice: an anatomy of the taxi monopoly in Beijing.

From 1992, China began to focus its economic reforms on building a socialist market economy. China's constitution has been revised several times in order to meet the rapid changes in economic reform by including the concepts of rule-of-law, human rights, private property rights and a socialist market economy. Considerable effort has been put into the building of a market economy including privatising state enterprises, transforming government functions and reforming the legal system. Market pricing systems and the forces of competition are gradually emerging in China. However, the market mechanism is still in a preliminary stage of development with the government continuously controlling and interfering in many aspects of economic activity.

This article attempts to address the problem of administrative monopoly in China through a case study of taxi monopoly in Beijing. The case reflects the conflict between building a market economy and working within the constraints of the old institutions. The article also attempts to provide answers to several questions such as the need for the taxi service to be under administrative control. Should the taxi service be controlled by administrative means at all? When should the government intervene in the market operation for the sake of public interests? In this case study, why has the government failed to rectify the situation when it is aware of the damages its intervention has caused to the interests of taxi drivers, consumers and the state? Is such government interference legal or just in the first place? Is it necessary to focus on administrative monopoly in order to foster market rules and competition? This study reveals that the biggest obstacle to building a market economy in contemporary China is administrative monopoly or government interference with market operation. Only when administrative monopoly is eliminated will anti-monopoly actions against other monopolistic behaviour be meaningful and justified. A management model for resolving the Beijing taxi monopoly is proposed.

Analytical Framework: Competition, Monopoly and Government Regulations

The Chinese economy is being transformed from a highly administrative and centralised planned economy into a market economy. One very essential reform is the transfer of economic decision-making power from the central government to the local governments and their various agencies to foster market mechanisms and promote competition. However, the transfer is not intended to remove regulated monopolies. Instead, it only allows local governments or economic sectors some decision-making freedom. (1) With the initiatives of fostering a market economy, the market forces and competition are emerging and growing. At the same time, however, the government's multiple roles as social and economic managers, owners of state assets and direct business operators remain basically unchanged. Administrative monopoly has prevailed and even taken root in the newly formed market through the formation of special interest groups between the government and business, which has undermined the competition and operation of market mechanisms in China.

Market Economy and Social Justice: Free Competition versus Monopoly

A market economy with free competition as its core economic structure, as opposed to monopoly, better serves public interests and social justice because of its contribution to improving people's economic and personal freedoms. As Hayek says, a society of free markets and limited governments will be beneficial to all citizens, providing each his best chance of using his own information for his own purposes. (2) He further argues that economic freedom does not only improve the lives of those who enjoy it but also of those who still aspire to it. (3)

Generally speaking, competition as opposed to monopoly contributes to promoting three goals: freedom, welfare and justice. (4) This is because first, competition is a highly effective means of maintaining a decentralised market structure so that every firm could expand its freedom of action by increasing its market power. Second, competition also promotes benefits by dealing with scarcity through increasing the volume of goods and services, optimising the allocation of resources or redistributing wealth in free competition. Third, competition promotes justice through following a fair set of distributive principles based on the three most prevalent principles of merit, need and equality. In many ways, competition will be an acceptable practice only for those who subscribe to a theory of justice in which merit plays an important role. (5)

However, a monopoly implies an exclusive possession of a market by a supplier of a product or a service. (6) As Milton Friedman observes, "Monopoly frequently ... arises from government support or from collusive agreements among individuals". (7) It is either a right granted by a government giving exclusive control over a specified commercial activity to a single party, or a practice in which a company or group has exclusive control over a commercial activity. (8) In the West, a natural monopoly is defined as a coercive monopoly since the barrier to the entry of competing firms is created by local governments either by providing the service itself or awarding a franchise to a private company and regulating it, but the economic power in a natural monopoly is because of absence of competition due to its natural competitiveness in intellectual property rights, new technology or large-scale operations. (9) However, in this study, monopoly is mainly divided into two types: economic monopoly, which includes natural monopoly; and administrative monopoly or coercive monopoly in the context of China, which includes government-granted monopoly and state/government monopoly.

An economic monopoly occurs when individual firms or a few firms misuse the market power or privilege accumulated through competition to control price, market entry or output in order to preclude other firms from entering the market. Such a monopoly only comes into existence when economic development reaches a certain stage. The actors are private firms and their market power is accumulated through competition rather than granted by the government, which means that it is not always exclusive and absolute. Therefore, economic monopoly refers to the manipulation and monpolisation of the market based on the economic power that is formed from large-scale production or capital accumulation or technological competitiveness. Natural monopoly is a typical type of economic monopoly with economy of scale.

In contrast, administrative monopoly is the result of imposing regulations or exercising specific administrative actions to preclude or restrict competition. It is the result of non-economic reasons including the legal monopoly granted by law and the monopoly formed from administrative interference, mainly in restricting market entry, imposing local protectionist measures and fixing prices. Sometimes, the state needs to ensure legal monopoly in some public sectors by administrative measures, which are operated within the law and the entrusted administrative power. However, such government-granted monopoly can easily lead to the formation of interest groups between governmental agencies and the monopolistic sector that represent a formidable force against competition.

As to whether an administrative monopoly has harmed competition or abused administrative power, it must be decided by monopoly enforcement institutions and anti-monopoly laws. It is only when an abuse of power by the government has taken place that an administrative monopoly should be regulated. Such abuse of administrative power is driven by the vested interests of a department or a locality and manifested in local blockades, departmental barriers, sector monopolies and collaboration between the bureaucracy and businesses. The practices in this regard may include collecting unreasonable charges on commodities from other regions through passing government regulations and issuing of notices, and abusing quality inspection means or setting up administrative barriers such as licences and sales permits to block local market players and obstruct free regional commodity flow.

There are similarities and differences between economic monopoly and administrative monopoly. They are similar in the abuse of power and privilege to restrict market entry and hamper free competition, which are the very targets of the anti-monopoly laws. However, they are different in many areas in terms of monopolistic actors, origin of power and damage to the market. The actors of administrative monopoly are governments or their various agencies while economic monopoly is run by individual firms or their collective force. In terms of the abuse of power and privilege, the market power in economic monopoly is formed from free competition based on its own competitiveness and strength, and thus may shift to other competitors in a market economy. However, the power in administrative monopoly is not earned through market competition, but exclusively granted by the law and thus, such power lasts longer and is more powerful than the market or economic power.

Moreover, the means of restricting market entry are also different. The actors in economic monopoly adopt anti-competition actions such as coalition with other firms in the form of trusts, cartels or syndicates in order to maintain their power and privilege in the market. Administrative monopoly, however, controls market entry through administrative regulations, by-laws and guidelines based on administrative power. A monopoly created through administrative power makes it illegal for competitors to enter the market. Yet when other firms have achieved success in the market, they would be severely regulated according to anti-monopoly laws while those powerful government-granted firms with legalised monopolistic power to exclude competition are privileged and profitable. In this sense, administrative monopoly is even more dangerous than economic monopoly in terms of the damage to foster a sound market order and the growth of market power. In contrast, a market economy promotes better economic freedom and social welfare, and fulfils the goal of social justice. This has also been confirmed by the proponents of economic democracy, who argue that monopoly creates conditions of artificial scarcity for the greater majority resulting in large-scale socioeconomic imbalance because common resources have been made inaccessible or monopolised under privatisation of corporate capitalism and centralisation of state socialism. (10)

Market Failure and Government Interference for Public Interests

The market economy alone, however, does not ensure that people or business organisations will be provided a fair playing field. This is because fairness is not an inherent attribute of markets and thus, the government is very important in the promotion and maintenance of social and economic justice through formulating policies and regulations to intervene or rectify improper situations. (11) Hayek doubts the viability of social justice, regarding justice as a property of the actions of individual persons rather than a notion accepted by people across an entire society. He writes, "Only situations that have been created by humans will be called just or unjust". (12) However, Hayek does emphasise the necessity of government interference where the market system fails to maintain social justice that is essential for guaranteed well-being. He says that "behind the abstraction known as 'the market', lurks a set of institutions designed to maximise the wealth and power of the most privileged group of people in the world". (13)

Even in a free market economy, the majority of created wealth is appropriated by landowners and monopolists through economic rents and thus concentration of such unearned wealth is the root cause of poverty. (14) When monopolies are not broken through the open market, sometimes a government will step in either to regulate the monopoly, turn it into a publicly-owned operation, or forcibly break it up by law. In general, the purpose of anti-monopoly legislation is to open the market for most actors, with less constraint through restriction of excessive concentration of the production and capital. It further aims to protect free competition and consumers in order to eventually build up a market system, leading to real economic democracy. (15) The OECD Committee on Competition Law and Policy states that there is general consensus that the objective of competition law is to protect and preserve competition as the most appropriate means of ensuring the efficient allocation of resources and thus the efficient market outcomes in free market economics.

Governmental regulations usually aim to benefit public interest and national goals, but not all regulations are helpful for enhancing economic welfare because conflict sometimes exists between the definition of "public interest" and its impact on economic welfare. Public interest embraces "groups whose interests do not necessarily coincide, and economic goals which may be mutually exclusive". (16) It also may favour an administrator's favourite camp or favoured economic goals. Monopolistic rent may be sought through either genuine innovation or rent-seeking when agents try to secure government protection for their economic status to create barriers to competition. Besides, the governmental administrative machine is itself not costless, especially when direct governmental regulation will not necessarily give better results than leaving the problem to be solved by the market.

Administrative Monopoly in China

Administrative monopoly in China includes government-granted monopoly and government/state monopoly. It features a mixture of market operation and state-controlled ownership. During the three decades of economic reform, government monopoly is declining and non-government monopoly or economic monopoly is increasing. Some new technological sectors and private firms, including foreign-invested enterprises, are not government-monopolised but are emerging as monopolistic forces in the market and will become the main force in economic monopoly.

At the same time, government intervention and administrative monopoly remain extensive and intensive in spite of the emergence of economic monopolistic force. The reasons are a gradual and top-down model of the economic reform, the vague definition of government functions and the strong interests of the government in the economy. The government is still greatly involved in economic operations especially in some important sectors including telecommunications, power, transport, gas and petrol. Although these government-granted monopolistic sectors are operating in a market-oriented style for profits and expansion, the ownership, regulatory scheme and resources allocation are all conducted according to the state plan and guidance rather than decided by market rules. These sectors are not open to market competition and their employees enjoy better welfare treatment than other sectors.

Chinese scholars have different understandings of the definition, nature and manifestations of administrative monopoly in China (17) Some regard administrative monopoly as market administrators abusing the power entrusted by the law or governments. This not only includes government agencies, but also organisations with entrusted administrative power. (18) Others consider it the result of direct or indirect interference of public power. Direct interference of public power at local levels takes place when local governments issue injunctions to directly restrict operations. Indirect interference refers to the creation of government-granted monopoly by granting sole operation or production to designated firms without direct government involvement in the operations. This includes monopolies in companies empowered with administrative authority, state-designated operations and sector monopoly. (19) This opinion stresses that administrative monopoly is unique in its combination of administrative power with market operations. (20) Hu An'gang clearly states that state/government direct monopoly is part of administrative monopolies, which exists in most state-owned operations, firms under absolute majority state control, and direct government operations by controlling personal, distribution and operation. (21) Still, some scholars understand administrative monopoly in both broad and narrow senses. In its broad sense, administrative monopoly refers to both legal and illegal uses of administrative power by governments and agencies to restrict competition. In its narrow sense, governmental agencies and their affiliated firms empowered with administrative power breach the law or abuse power to restrict competition. This is illegal monopoly and has to be regulated under anti-monopoly laws. (22) Public and administrative power is manipulated to protect or pursue local and departmental interests, or the interests of the designated firms. (23) In its narrow sense, administrative monopoly is a misuse or abuse of public power on the part of administrative agencies or organisations entrusted with administrative power, and the misuse or abuse of administrative power is in this sense regarded as illegal and should be brought under control by law. (24)

The debates on administrative monopoly in China reveal some basic elements of an administrative monopoly. First, the actors are governments and their agencies, including companies and organisations with entrusted administrative power. Second, it is an abuse or misuse of administrative power and is thus illegal. Third, it has the motive of gaining illegal interests for local, sectional or specific operators. Fourth, it is enforced through compulsory administrative means, and finally, it causes actual damage resulting from the restriction of competition. The types of administrative monopoly include concrete administrative behaviour, which is case-by-case action on specific subjects, and abstract administrative behaviour, which manifests itself often as rules and regulations made by administrative power. Administrative monopoly is mainly abstract behaviour in the form of administrative regulations, orders, ordinances and decisions for general market actors. It is noted that only specific administrative behaviour and action can be dealt with by the law under the current Chinese legal system, which, however, does not provide legal remedies through administrative lawsuit against any governmental abstract behaviour.

According to the State Administration for Industry and Commerce of the PRC, there were 6,548 monopoly-related cases investigated nationwide between 1995 and 2005, among which the main forms of monopoly by these actors included illegally acquiring an advantageous market position, making monopolistic agreements and using administrative monopoly in order to restrict competition. Misuse of market advantage can occur in sectors with natural monopoly in public utilities and those having an exclusive position under the law such as tobacco, salt, petroleum, etc. Among these cases, administrative monopoly included two types. In the first, local governments exercised local protection measures and built obstacles to exclude competition from outside of their region. In the second, government agencies such as the Public Security Bureau, Transport, Civil Agency and Education abused their power to restrict competition. Both of these involved the use of administrative power to either directly control market entry and operation or indirectly allow selected firms or sectors the exclusive rights and privileges to monopolistic operation. (25)

China has not had an anti-monopoly law or an independent regulating body to deal with administrative monopoly since the economic reforms started in 1978. For a long period, there have been only some scattered specifications on competition in various laws and regulations such as the Anti-Improper Competition Law (AICL). These laws and regulations have neither defined monopoly nor regulated the practices of administrative monopoly. The relevant stipulation available in the AICL promulgated in 1993 is Article 7 which only roughly provides that the government and its departments may not abuse power to force transactions, prevent outside products from entering the local market or local products going out of the local market. In addition, Article 30 of the law stipulates the legal responsibility for breach of this stipulation, which only requires the relevant agencies to correct their misconduct or bear administrative sanctions in serious cases rather than be punished by law.

Since 1994, China has started to draft an Anti-Monopoly Law (AML), and the draft has gone through several debates and revisions due to the sensitivity of administrative monopoly in China. The draft was eventually passed in June 2006 and came into effect in October 2008. The approval of the long awaited anti-monopoly law not only marks a significant step towards creating a fair and orderly market but also reveals severe resistance from the government. However, the current draft will not offer a legal remedy for all forms of monopoly. It focuses mainly on checking economic monopolies, especially those represented by big foreign companies by excluding most of the clauses related to administrative monopolies. (26)

The issue of administrative monopolies is covered in the fifth chapter of the AML but is not covered in the initial definition of a monopoly in the first chapter. Lawmakers chose not to outlaw administrative monopolies. Instead, in a move considered a compromise to ensure passage, they inserted a clause making it illegal to abuse administrative power by restricting competition. In other words, administrative monopoly will not be illegal and thus will not be legally constrained, except for those actions that involve abuse of administrative position or utilise advantages in the market. It does not have the power to challenge administrative decisions or rules even if it is against the competition since the courts are powerless to change or repeal abstract administrative actions (such as an administrative regulation or a normative document). Under the AML, both an Anti-monopoly Commission and an Anti-monopoly Law Enforcing Agency will be established, consisting of chief officials and experts from numerous ministries of the State Council in order to settle major cases involving monopoly and to supervise and coordinate the implementation of this law. Since most monopolies in China are a result of mixed government-business relations, these anti-monopoly bodies will not be effective in restricting administrative monopoly. These bodies would be more powerful if they were established and financed directly by the State Council so that they are empowered with independent and legal status, high administrative power and quasi-judicial or quasi-legislative powers.

During the drafting process, three conflicting views on the direction of the Chinese anti-monopoly law emerged, each reflecting concerns about certain aspects of the Chinese markets. (27) One view holds that, although an antimonopoly law is necessary, there is no necessity to emphasise administrative monopolies as this would excessively restrain the behaviour of the government, obstruct the process of state-guided reform and put the government in an awkward position in future reforms. In contrast, the second view holds that the excessive dependence of legislation on administrative bodies should be changed in accordance to the Legislation Law. An AML should be introduced at an early date with a focus on the elimination of administrative monopolies. This requires a fundamental transformation of the role of the state and the function of the government. A third opinion holds that the AML should target monopolistic behaviour rather than the structure of enterprises resulting from the pursuit of economies of scale and technical innovation as a major source of economic growth. A monopolistic structure formed through market competition neither precludes a competitive outcome nor pursues monopolistic profits.

The law is designed mainly to prevent economic monopolies despite the fact that administrative monopolies are often considered the greatest hindrance to competition in China today. The new law does not undercut central government control of industries that are considered to be crucial to national interests, including electronics, telecommunications, postal services, airlines and railways. Moreover, local governments maintain their traditional grip on public services such as medicine, education, publications and tourism. Leaders with special interests in these government-linked sectors have long resisted anti-monopoly legislations. It is clear that the AML does not aim to resolve administrative monopoly because it defines only it in the general principles. Although the law generally governs any monopolistic practice with anti-competition consequences, it is unlikely to become an effective instrument to curb administrative monopoly, or to help improve this situation very much since the key to nurturing a good market order is to transform government functions.

In fact, most anti-monopoly laws in other countries are formulated and operate under a long-established market mechanism with a sound competition environment, while China is still in the preliminary stage of building a market economy. Competition laws in the West focus more on regulating the agreements or coordinated activities between companies that restrain competition in contrast with the dominance of administrative monopoly arising from governmental regulations and power. Administrative monopoly in China is more a policy issue than a legal issue, especially at local levels where monopoly is widely and deeply entangled with corruption. The anti-monopoly legislation justifies government interference with the market in the name of protecting public interest against the unfair power of corporations or economic injustices but ignores the fact that genuine monopolies exist in the government and overlooks those enterprises that are protected from competition by force of law. There is only one reasonable anti-monopoly policy, which is to end government monopolies and foster market competition. (28)

Therefore, the case of the taxi monopoly in Beijing should serve as a classic case of government failure in interfering with the market economy, which further undermines the goal of social justice. Taxi operations nationwide take two main forms in China. The most common practice is the company system, exemplified by the Beijing and Shanghai model, in which local governments grant property rights and operational rights to taxi companies, and drivers pay monthly rent to the companies. The other form is the loose relationship between the drivers and companies, exemplified by only the Wenzhou and Tianjin model, in which drivers have ownership of taxi cabs while taxi companies only charge certain management fees. The taxi sector on the whole has experienced similar restructuring processes as in Beijing, from market-oriented free competition to tight government restriction and then to the current monopoly. Most company drivers suffered a similar fate to their counterparts in Beijing but the taxi monopoly in the capital city has highlighted the problems that exist in the taxi sector in China. (29)

The Beijing Municipal Transport Bureau (BMTB) intervened in taxi operations by administrative regulations, an enduring method of the old planned economic system rather than reasonable intervention in maintaining market order and social justice in the situation of market failure. In this regard, this study sheds light on the theory of competition, monopoly and government regulations in terms of the influence of administrative monopoly in building a market economy. It helps in understanding how a state-dominated economy like China can foster market institutions and how the government can lead this transformation by acting impartially as the market rule-maker and yet maintain a heavy hand in many economic sectors. More importantly, this study explores how a top-down model of building a market economy is utterly different from Western economies where fostering competition is mainly to regulate market power that builds up from a sound competitive environment. In China, the key priority is not to be an anti-market power or economic monopoly despite the importance of regulating these practices, but to focus on constraining administrative monopoly and separating government functions from business operations. The findings will be helpful for those countries attempting to foster market mechanisms.

The Case of the Taxi Monopoly in Beijing

A prominent feature of the taxi monopoly in Beijing includes the use of administrative means to grant exclusive, timeless and costless franchise rights in taxi operations to taxi companies that have no operational qualifications. These companies have close interests with the government Bureau and its officials. The Bureau strictly restricts licence approval, fixes taxi fare prices and intervenes in internal management affairs. The taxi companies are neither a kind of drivers' union or autonomous organisations of self-management. In fact, they are the direct cause of the infringement of drivers' rights. In a sense, they are the extension of the Bureau's power, in the form of a commercially-oriented operation. Therefore, the BMTB and taxi companies as a whole are responsible for monopolising the taxi market and infringing drivers' rights and interests.

The taxi monopoly in Beijing has recently been widely reported and debated in China. (30) Before reforms were launched to open up market entry into this sector, the taxi industry in Beijing was dominated by few companies and a limited number of vehicles directly under the sole control of the BMBT. Within a couple of years, the number of cabs from both state-owned and collective-owned taxi companies reached around 10,000 and 259, respectively. As the pace of economic reform quickened after 1992, the Beijing Municipal Government declared an ambitious goal of having five taxis available whenever a customer flags a taxi. In 1994, there were 1,400 companies and 60,000 cabs. Each driver invested a sum of money (chu zi kuan) towards the cost of the vehicle, amounting to almost half the purchase price, and thus enjoyed the property rights of their cars with relative freedom of operation after paying a management fee to the company.

However, due to poor regulation and management, the expansion became chaotic as even primary schools and kindergartens became involved in the taxi business. In order to control the situation, the BMBT started to restructure the taxi market in 1996, not by improving market mechanisms to standardise market entry and quality control, but by restricting taxi companies from selling licences to individual drivers. In other words, the entry into taxi operation would be exclusively controlled by taxi companies rather than open to the public, while at the same time drivers lost autonomy in the operation and property rights of their cabs. Rather than giving drivers' better benefits as was the case in other state monopolistic industries, taxi drivers became the prey and victims of government regulations and taxi companies. According to the new administrative regulation, all taxis should be returned to the companies irrespective of the fact that the drivers had invested a large sum of money for the vehicle when they signed the contract. Thus, the restructuring effectively transferred the drivers' investments to the companies. At the same time, the drivers became employees of the taxi company from previous cooperative relations. The company did not refund drivers the money they had invested in the car. Instead, they turned this money into risk guarantees (fengxian baozhengjin), in effect confiscating the individual driver's property.

Under the new regulations, taxi drivers were also required to pay about 5,000 yuan in monthly rent (yue fen qian) to the taxi company. Many taxi companies became prosperous in this way. In 2000, the municipal government encouraged businesses to expand by merger or acquisition, and small companies that had fewer than 200 cars were urged to merge with big companies. Through the process, the number of taxi companies was reduced from 1,000 to 200. As a result, 12 major companies emerged at the end of this process. At present, there are a total of 67,000 taxi vehicles in Beijing, with only 1,000 being operated independently by individual drivers and the rest of them by company drivers (see Table 1). Compared to independent taxi drivers who enjoy autonomy and pay only a management fee to the BMBT, company drivers are requested not only to submit risk guarantees but also pay monthly rent to the company.

Thus, the formation of taxi companies was not a result of market competition or large-scale economic effect, nor was it for the purposes of reducing operational costs and increasing social welfare. It was the visible hand of the local government which granted sole franchise rights and privileges of taxi services to the taxi companies with the building of high entry standards, controlling taxi prices and restricting free transactions of licences. With the protection of the government, the taxi companies monopolised local taxi operations without adhering to market rules.

The taxi companies in Beijing were typically enriched in two ways during the restructuring process. One was the use of the drivers' investments for starting-up business or expansion. The Sheng Da Li Taxi Company is such an example. The company now has 262 taxis and nearly 30 million yuan in assets. According to its general manager, he applied for a certificate to operate taxi services from a village government in a suburb in Beijing in 1992. After the village government issued the certificate, he then submitted an application to the BMTB for approval to operate passenger transport. At this stage, he was given a quota of 60 taxis. He recruited 25 drivers who each invested 50,000 yuan for their vehicles, obtaining a total of over 1.2 million yuan. On his part, it was zero investment. (31)

The other way was to buy cheap cars on borrowed money and then sell them to drivers at a higher price. Mr Zhang, a taxi company owner, bought 46 taxis and sold them to his drivers at a profit. His company became prosperous by 1996. Soon after, he bought back these taxis from the drivers at a price far lower than what the drivers had paid on the pretext of upgrading standards in order to charge a higher monthly rent. After the restructuring, the monthly rent increased to over 4,000 yuan, plus 30,000 to 50,000 yuan of risk guarantee. Zhang further expanded his company to 262 taxis through the purchasing of small taxi businesses, transforming what had been a one-man village enterprise into a joint-stock company. He claimed ownership to all the taxis. (32)

Throughout this process, the taxi drivers became the biggest victims while the companies became the biggest beneficiaries. Mostly farmers and redundant workers from state enterprises, the drivers spent almost all their savings on the purchase of taxi vehicles only to have them returned to the companies. Although they became employees of the company, they had to pay a monthly rent for the vehicles and were often denied legal benefits such as pensions, retrenchment benefits, insurance and medical treatment. They also had to pay for their own maintenance, traffic tickets and other costs.

Drivers were particularly disadvantaged by the so-called risk guarantees, namely the sum of money roughly equivalent to the price they had invested in the taxis, held by the company against the risk of damage or other loss to the vehicle. For example, a taxi driver, Zheng, was required by his company to pay 115,000 yuan in 1995 for an old car which was actually worth no more than 50,000 yuan. He also paid a monthly rent of 1,850 yuan. In 2000, the company sold his car for 70,000 yuan. Another driver, Qiu, paid his company 100,000 yuan for a used taxi. A year later, he had earned around 10,000 yuan. The company then sold the taxi and Qiu was fined, losing some 80,000 yuan in the transaction. The same thing also happened to many other drivers in Qiu's company. (33)

When a driver left the company, however, the company often withheld this sum in part or wholly. The companies often found ways to deduct sums against the risk guarantees, and some companies even imposed fines to resolve their own financial crises. It was reported that a company driver, Wang, was fined 1,000 yuan by the traffic police and given a two-month suspension from driving due to a breach of traffic regulations in 2000. His company used this as an excuse to fire him and also forfeited 35,000 yuan from his risk deposit. (34)

Moreover, company drivers were excluded from the basic rights and benefits as stipulated in the Labour Law, which requires companies to make provisions for pensions and insurance for their employees. (35) This is something the taxi companies did not do. One reason is that rural workers are not included in the urban welfare system in China for a long time. Another reason is the financial cost of insurance. The annual insurance for a taxi vehicle worth 100,000 yuan would be 5,350 yuan at national standard rates. In other words, companies would have to pay 67,000 drivers in Beijing a total premium of over 300 million yuan. Instead of providing insurance, some companies adopted an internal insurance scheme which further justified the charge of a high monthly rent. However, this internal scheme would not apply to individual drivers in the case of accidents or breaches of traffic regulations. On the contrary, the company would fine such drivers as a form of punishment.

One such case is that of Deng. In 2001, he was treated in hospital for a condition resulting from long hours of driving. During the four months of medical treatment, the company still charged him a monthly rent of 5,100 yuan, although he was unable to work and had no income at all. Deng wanted to return the taxi to the company but his request was refused. The company warned him that returning the taxi would be a breach of contract and he would have to compensate the company 15,000 yuan, to be deducted from his risk guarantee. In order to cover hospital fees and his monthly rentals, Deng had to return to work before he made a full recovery. (36) It is estimated that at least seven taxi drivers died suddenly since 2004, and of 200 taxi drivers given health checks in 2005, less than 20 per cent were given clean bills of health. (37)

Under these circumstances, taxi drivers became one of the most vulnerable groups of employees, working long hours for little pay and benefits and having to contribute rent and risk guarantees to their employers. When their interests were infringed, there was nowhere for them to seek redress after the Beijing Supreme Court issued a notice on 7 September 1999 preventing courts from settling disputes between taxi drivers and their companies and requiring that all such disputes be resolved within the companies or their superior management agencies. Even if the courts were open to them, most drivers could not afford the litigation fees. In this case, since the government--the Beijing Transport Bureau--controls the taxi service, disputes resulting from the restructuring process between companies and drivers are many and complicated. The courts in Beijing have accepted 160 such disputes since the restructuring, some of them as group litigation. The courts are reluctant to be involved in these types of disputes for fear of violating governmental regulations or risking social disorder.

In order to protect their rights, drivers frequently appealed to the superior authorities or even demonstrated outside the courts. Three taxi drivers are reported to have chosen to fight for their right to operate independent taxis. (38) They filed an application with the BTMB in 2006. It was the first time that the bureau had received such an application since 1994. So far, more than 2,000 taxi drivers have joined the cause. The bureau rejected applications on 12 July 2006 on the basis that there was a quota on the number of taxis as stipulated in the Outline for Beijing's Transportation Development in the 10th Five-Year (2001-2005) Plan. Drafted in 2002, the Outline says that "the overall number of taxis in Beijing has met the limit target and no more transport capacity should be added." Four days later, the three drivers went to the bureau again, asking for a hearing to discuss the rationality of the policy but were refused again.

Thereafter, the three tried to bring an administrative lawsuit against the administrative monopoly to the Xuanwu District People's Court on 1 September after the Administrative Licensing Law (the ALL) went into effect in July 2006. The Law aims to restrict the government's power, streamline administrative approval procedures and remove unnecessary restrictions on licence approval. Article 13 of the Law stipulates that administrative licensing may not be needed for industries that can be effectively regulated through market mechanisms. The three drivers appealed for the abolition of the taxi quota in the taxi industry for free market forces to work, as a quota would actually create discriminatory market entry barriers for individual taxi drivers and lead to a monopoly by taxi companies. They described the present taxi management system as one under which "taxi drivers, taxi customers and the State all make contributions to taxi companies". (39) On 8 November 2006, the first hearing of the case took place. Lawyers for the bureau, however, argued that the Outline has been approved through legal procedures and should be strictly enforced. Although the court has yet to issue a verdict, the case has drawn wide media coverage and debates from researchers and the public. (40)

It is apparent that the taxi operation problems in Beijing have been a result of administrative failure rather than market failure, a situation which did not need government interference in the first place. It is very clear that such government interference took place because of imperfect market mechanisms in the taxi market. The outcome of government control over this sector is a waste of social resources, since taxi operational rights or licensing are public resources. Moreover, the loss in social welfare and the low efficiency in this sector due to rent-seeking have caused damages to the public, the market order and the image of the government as a provider of social welfare and protector of underprivileged groups in the market.

A Management Model for the Beijing Taxi Monopoly

Taxi operations in Beijing have been controlled by the taxi companies through administrative regulations. Under this system, taxi companies benefitted at the expense of the interests of taxi drivers. These regulations have contributed to a special interest group of taxi companies and bureau officials. The case shows clearly who falls victim to the taxi monopoly in Beijing and who benefits greatly from it. Taxi services in Beijing are not operated by market rules but by administrative power. Law Professor Shi Jichun points out that the government has been trying very hard to regulate the taxi industry through executive control in line with outdated ideas inherited from a planned economy, "but the monopoly system has unfortunately ended in failure by sacrificing the maximum interests of the whole society". (41)

The BMTB has not only failed to take effective measures to support disadvantaged taxi drivers as a result of unequal contracts with their companies, but has also disqualified itself as an impartial regulator of the monopoly since it is the very agency that has granted the sole franchise rights and privileges to these companies and has been deeply involved in taxi operations and rent-seeking. In fact, the taxi industry has become one of the sectors under the protection of the government's legal monopoly, "which has lined the pockets of the business owners as well as some officials but has badly hurt the interests of the State, taxi drivers and their customers" (42) as noted by Shen Mengpei, a scholar and a deputy to the Beijing Municipal People's Congress acting to safeguard the interests of taxi drivers.

The solution for the taxi problem in Beijing is to combine three important areas including free market competition; legal and necessary government regulations aimed at promoting market rules against the monopoly and to maintain social justice; and taxi drivers' self-management of taxi operations based on the concept of economic freedom.

First, taxi services must be open to free competition based on increasingly improved market mechanisms. Government control of the taxi service in Beijing has undermined the interests of the state, the drivers and the public. The tax revenue from taxi companies is very low since a taxi company currently pays about 250 yuan per month in business taxes on each cab to the state. This is 170 yuan less than what a self-employed taxi driver pays. Assuming each taxi driver pays at least 1,500 yuan in taxes per month, the annual increase in tax revenue for the 780,000 taxis nationwide would have amounted to over 14 billion yuan. This would be 1.2 billion yuan for the total of 66,000 company-owned taxis in Beijing. Moreover, if the BMTB auctions taxi licences as public resources in an open market, it would mean more revenue for the state as the fee for a ten-year licence could amount to at least 200,000 yuan or even double or triple of this amount, as shown in some cities. In this way, the income of auctioning the 66,000 company-owned taxis in Beijing would amount to 13 billion yuan every ten years, or 1.3 billion yuan a year that is equivalent to 2.9% of Beijing's revenue in 2001. (43)

Drivers' interests would also be safeguarded. Under the current system, the gross income of a taxi driver, including individual drivers and company drivers, is 9,000 yuan per month. However, after deducting costs (including the monthly rental of around 5,000 yuan), the net income per month for a company driver is only 1,900 yuan. Without companies to act as the intermediary between the state and the taxi drivers, a driver would have an income of 6,300 yuan a month (see Table 2). The annual average wage in Beijing in 2001 was 17,300 yuan per worker for an annual 220 working days at 79 yuan per day. At this rate, a taxi driver, who may work up to an equivalent of 585 days a year (since they usually work long hours), would have an annual income of 46,215 yuan or 3,851 per month.

The administrative monopoly over the taxi service has also resulted in high costs to customers. Competition between drivers would reduce costs to customers as taxi drivers do not need to pay a monthly rent. With the rise of petroleum prices in recent years, the operation of taxi services in Beijing has become more difficult. A public hearing was conducted to increase taxi prices instead of reducing the amount of deposit money and monthly rent. (44) This only further increases the burden and workload of company drivers since it is more difficult to attract customers. The monopoly and increasing fares have resulted in an increase in illegal taxi operations and it was said that there were over 30,000 black market taxis in Beijing which operate without licences because the door for independent operations has been closed. (45)

The most serious damage caused by an administrative monopoly of taxi services is in the efforts to build a market economy and a socialist rule-of-law country. The only solution is to reopen the taxi market based on market mechanisms. Government regulations should be limited to assuring quality and fair competition. The open market entry in taxi services is closely related to the goals of building a market economy and maintaining social justice since it benefits the majority rather than minority monopolists.

Second, government regulations for perfecting market order and safeguarding public interests are necessary for free and fair competition. This requires the administrative agencies to set rules to market entry standards and quality services in order not only to safeguard customers' interests but also to enforce labour laws in favour of taxi drivers. Thus, the government remains important in a market economy with the provision of a regulatory framework and service contributing to economic freedom and social justice.

Third, market mechanisms and proper governmental regulations are not sufficient for guaranteeing taxi drivers' legal rights and it is necessary to reform taxi companies into workers' self-management organisations in order to represent their own interests. Economic democracy stresses the importance of a market economy to protect free competition and prevent excessive concentration of economic power. (46) It can be defined in terms of three basic features: worker self-management controlled democratically by its workers; the market where these enterprises interact with each other and with consumers in an environment largely free of governmental price controls; and the social control of investment through a network of public investment banks. (47) By combining the best features of the socialist and capitalist systems, economic democracy abolishes private ownership of productive resources and wage labour but retains the market.

Economic democracy advocates an economic system in which firms operate in a market but are governed by those who work for them. It is a morally desirable goal in terms of socialist theory. (48) Unlike some other models of economic democracy, worker ownership is not a necessary characteristic of the basic model. While it may be possible in certain circumstances to use worker ownership as a vehicle to achieve worker self-government, it is the system of government and not the system of ownership that defines an economic democracy. (49) Many theories of economic democracy hold that conditions of scarcity are artificially maintained by cooperation structures that confine abundance to an exclusively entitled minority. In this view, socioeconomic imbalance stems not from a failure to manage limited resources in a world of scarcity but from mismanagement of virtually unlimited abundance and prosperity.

Economic freedom does not necessarily come with economic rights since the development of a modern market often damages the rights and interests of its rivals, but economic democracy will help economic freedom develop in a democratic manner so that all systems can be arranged according to the interests of the majority to fulfil social justice. (50) As David Schweickart says, "the problem is not to choose between plan and market, but to integrate these institutions into a democratic framework". (51)

To sum up, the solution for the taxi monopoly in Beijing can be formulated as: market competition + taxi drivers' self-management + government regulations.


The market economy requires that the government exert its power according to the rule of law in order to promote market competition by relying on market rules rather than arbitrary interventions. The crux lies in separating government's administrative roles from business operations, enhancing market mechanisms, making innovations in corporate governance and seeking economies of scale. Since governmental agencies at different levels have multiple connections and overlapping interests in local businesses, it is difficult for them to remain neutral in making and enforcing rules. Administrative monopolies are far more damaging than economic monopolies in terms of the distortion of transaction behaviour and the preclusion of market competition. Only when market power is released can competition be fostered. In other words, anti-monopoly is firstly anti-administrative monopoly in its undermining of the formation of market competition.

The case of the taxi monopoly in Beijing reveals that problems arising in the transition of the market in China have to be addressed through the market system. The unique situation in China is a problem of the market, not one caused by the market. Distortions of market mechanisms caused by the legacy of a planned economy or administrative economy over the years can be observed everywhere. Thus, reform and restructuring of the monopolised sectors should be carried out through establishing and developing a legal framework that aims to foster and promote competition and social justice by primarily concentrating on anti-administrative monopolies in order to eradicate administrative barriers to competition and maintain social justice.

(1) Rong-I Wu and Yun-Peng Chu, eds., Business, Markets and Government in the Asia Pacific: Competition Policy, Convergence and Pluralism (London and New York: Routledge, 1998), p. 16.

(2) Friedrich A. von Hayek, The Constitution of Liberty (Chicago: University of Chicago Press, 1960), p. 64.

(3) Ibid., p. 65.

(4) Hanno Kaiser, "What Are the Goals of Competition?", Antitrust Review, 10 Dec. 2005 at <> [14 Nov. 2008].

(5) Ibid.

(6) Britannica Concise Encyclopaedia at <> [10 Dec. 2009].

(7) Milton Friedman, Capitalism and Freedom (Chicago: The University of Chicago Press, 2002), p. 208.

(8) The Free Dictionary at <> [10 Dec. 2009].

(9) In the West, a natural monopoly belongs to a coercive monopoly by governments granting sole franchise rights in public utilities to the private firms, but in China, these sectors are state/government-monopolised and belong to coercive or administrative monopoly while the term "natural monopoly" in China is defined as an economic monopoly.

(10) Robin Archer, Economic Democracy: The Politics of Feasible Socialism (Oxford: Oxford University Press, 1995), p. 45.

(11) Douglas J. Amy, "Government as the Champion of Justice, Equality, Freedom, and Security", web project at Mount Holyoke College, at <> [12 Oct. 2008].

(12) Friedrich Hayek, Law, Legislation and Liberty, vol. 2: The Mirage of Social Justice (London: Routledge and K. Paul, 1973), p. 69.

(13) Ibid., p. 78.

(14) Henry George, Progress and Poverty (1879) (New York: Cosimo Inc., 2005).

(15) "Economic Democracy is Not Less Important than Political Democracy", Shanghai Business Daily, 2 Sept. 2008, at <> [24 Dec. 2008].

(16) George Djolov, The Economics of Competition: The Race to Monopoly (New York: Haworth Press, Inc., 2006), p. 78.

(17) For details, see Zhao Qingqing, "Xingzheng longduan de jieding: fan longduanfa tiaozheng de fanwei" (The Identification of Administrative Monopoly: The Jurisdiction of the Anti-monopoly Law), Zhong gu wang, at < falvlunwen/jjflw/fldflw/200906/195926.html> [14 Jan. 2010].

(18) Li Yong, "Woguo xingzhenglongduan yu shimaozuzhi guomindaiyu congtu tanxi ji qishi" (An Exploration into and Inspiration from the Conflict between Administrative Monopoly in our Country and the National Treatment of the WTO), Guoji maoyi wenti (Issues in International Trade) 2 (2001).

(19) Jiang Yanjun, "Zhongwai xingzhengxin longduan yu fanlongduan lifa bijiao yanjiu" (A Comparative Study of Chinese and Foreign Administrative Monopoly and Antimonopoly Legislations), Zhengfa luntan (Political Legal Forum) 3 (2006).

(20) Zhang Delin, "Lun woguo xianjieduan longduan yu fanlongduanfa" (On the Monopoly and the Anti-monopoly Law in Contemporary China), Jingjiyanjiu (Economics Research) 6 (1996); Hu Ruying, Xingzhengyu longduan: shehuizhuyi weiguanjingji fenxi (Competition and Monopoly: Socialist Micro-economic Analysis) (Shanghai: Shanghai sanlian chubanshe, 1988), p. 48.

(21) Hu An'gang, "Zai shehuizhuyi shichangjingji tizhi xia fan xingzhenglongduan yeshi fanfubai" (Anti-Administrative Monopoly is the Same as Anti-corruption in the Socialist Market Economic System), Jingji cankao bao (Economic Information Daily), 11 July 2001.

(22) Zhang Mingsheng, "Fanlongduan de falii sikao" (Legal Perspectives of the Antimonopoly), Xuehai 4 (2002); Zhang Ruiping, "Guanyu xingzhenglongduan de ruogan sikao" (Some Thoughts about Administrative Monopoly), in Fan longduanfayu shichang jingji (The Anti-monopoly Law and the Market Economy), ed. Wang Xioaye (Beijing: Fali chubanshe, 1998); Zheng Pengcheng, "Lun xingzhenglongduan de gainian yu tezheng" (On the Conception and Features of Administrative Monopoly), Shaaxi shifan daxue xuebao (Journal of Shaanxi University of Science and Technology) 2 (2000).

(23) Zou Lijun, "Qiantan fan longduanfa dui xingzhenglongduan de guizhi" (A Brief Discussion of the Regulation of Anti-monopoly Law on Administrative Monopoly), Guangxi zhengfa guanli ganbu xueyuan xuebao (Journal of the Guangxi Institue of Law and Politics for Cadre Administration) 6 (2002); Zheng Hanjun, "Dui woguo xingzhenglongduan de fansi" (Reflection of Administrative Monopoly in China), Jiangsu gong'an zhuanke xuexiao xiaobao (Journal of Jiangsu Public Security College) 4 (2002); Xie Kepeng, "Xingzhenglongduan bu ying you 'fan longduanfa' tiaozheng" (Administrative Monopoly Should Not be Regulated by the 'Anti-monopoly Law'), Shanxi shida xuebao sheke ban (The Journal of Shanxi Teachers University) 2 (2001); Zhong Mingzhao, Xingzheng fa (Administrative Law) (Beijing: Fali chubanshe, 1997), p. 314.

(24) Qi Duojun, "Zhongguo fan longduan lifa yanjiu" (A Study of Anti-monopoly Legislations in China, Faxue pinglun (Legal Review) 4 (1997): 54-8; Wang Baoshu, "Qiye lianhe yu zhizi jingzheng" (Firm Coalitions and Restriction of Competition), Faxue yanjiu (Studies in Law) 1 (1990); Wang Qingxiang, "Shilun woguo fan longduan lifa suoying guizhi de longduan" (A Tentative Discussion of Monopoly that Should be Regulated by Anti-monopoly Law in China), Faxue (Law) 11 (1999); Cao Shibing, Fan longduanfa yanjiu (A Study of the Anti-monopoly Law) (Beijing: Fali chubanshe, 1996), p. 16; Liu Jianwen and Cui Zhengjun, Xingzheng fa yaolun (The Main Theories of the Administrative Law) (Wuhan: Wuhan daxue chubanshe, 1996), p. 170.

(25) Wang Xueqing, Guanzhi longduan: longduan hangye de Zhengfu longduan (The Regulated Monopoly: Government Monopoly in Monopolistic Industries) (Beijing: Zhongguo shuili shuidian chubanshe, 2004), p. 17.

(26) Xinhua News online, at <> [15 July 2008].

(27) China Daily, 26 June 2006, p. 1.

(28) Gregory Bresiger, "Monopolies versus the Free Market", Freedom Daily, 22 Jan. 2007, at <> [25 Sept. 2008].

(29) See, for example, "Chuzuche hangye dapo longduan hushing gaozhang" (A Strong Appeal for Breaking Monopoly in Taxi Sector), Zhongguo fazhan menhu (China Law Faction), 28 Feb. 2007, at <http//> [2 Feb. 2010]. In 2008, there were increased reports about taxi strikes in many cities such as in Chongqing, Shenzhen, Sanya and Jinan. See "Gedi chengshi chuzuche siji bagong shijian" (The Incident of Taxi Drivers Hold Strike in Some Cities), Jingji xuejia chazuo (Teahouse for Economists) 1, 8 Feb. 2009; "Chuzuche hangye jixing fazhan, zhuanjia jianyi lifa jieding cheliang fenqian" (The Abnormal Development in the Taxi Sector and Experts Suggested Legislation by Experts to Set the Monthly Rent), Dongfang zaobao (Oriental Morning Post), 12 Nov. 2008.

(30) For example, Wang Keqin, "Beijing chuzuche hangye de qi da heimo" (The Seven Big and Dark Secrets behind Beijing's Taxi Sector), Zhongguo jingji shibao (China Economic Times), 6 Dec. 2002, pp. 1-5; Zhongguo qingnian bao (China Youth Daily), 5 Sept. 2004 and 12 May 2006; Xinhuanet, 17 May 2005; Chinanet, 26 Apr. 2006 and 10 Jan. 2007. When writing this article, I took references from a wide variety of sources, including media reports, journalist investigations and my own formal and informal conversations with taxi drivers. For the sake of protecting the taxi drivers' privacy, only their surnames are given.

(31) Wang Keqin, "Beijing chuzuche hangye de qi da heimo" (The Seven Big and Dark Secrets behind Beijing's Taxi Sector), 2002.

(32) Ibid.

(33) Zhongguo qingnian bao (China Youth Daily), 5 Sept. 2004.

(34) Ibid.

(35) It was reported that five taxi drivers in Beijing sued their company for not paying insurance and pensions for them between 1993 and 2002, and the court granted their suit. In most situations, the taxi companies did not do this or postponed such responsibility until they were urged by the Labour Bureau. For example, 70 per cent of the drivers interviewed in Beijing did not have these welfare packages despite the fact that some companies charged them high risk guarantees to cover the insurance and pensions. Beijing wanbao (Beijing Evening News), 7 Feb. 2002.

(36) Xinhuanet, 17 May 2005.

(37) Dongfangwang, 18 Apr. 2006, at < node7613/userobject1ai101603.html> [18 Mar. 2008].

(38) China Daily online, 12 June 2008, at <> [15 Apr. 2009].

(39) Ibid.

(40) There have been many appeals for privatising taxi operations in Beijing and China. For example, a scholar, Hu Xingdou, submitted a petition "Dui Beijing chuzuche hangye jingxing diaocha jianguan de jianyishu" (Proposal for Investigating and Regulating the Taxi Sector in Beijing) to the Central and Beijing Municipal governments in 2008.

(41) Xing Zhigang, "Beijing Drivers Fight to End Taxi Monopoly", China Daily, 24 Nov. 2004, at <> [15 Dec. 2008].

(42) China Daily, 24 Nov. 2004, at < content_394460.htm> [18 Dec. 2008].

(43) Zhongguo qingnian bao (China Youth Daily), 5 Sept. 2004.

(44) Chinanet, 26 Apr. 2006.

(45) According to an investigation made by China Youth Daily on 25 Apr. 2006, the black market income of drivers was five times more than that of company drivers but they faced high risks of being outlawed. See "Quyu chuzuche: zhengguihua bu dengyu gongsi hua" (Regional Taxi: To Normalise it is Not the Same as to Corporatise It), Xin Jing bao (New Beijing Newspaper), 15 Jan. 2010; and Wang Chao "Chuzuche nengfou geti jingying? Beijing chuzuche ye de liyun liusi" (Can Taxis be Operated by Individuals? The Flowing Direction of the Profits in Beijing's Taxi Sector), Zhongguo qingnian bao (China Youth Daily), 30 Nov. 2009.

(46) For a general discussion of economic demacracy, see, for example, Robert A. Dahl, A Preface to Economic Democracy (Berkeley, CA: University of California Press, 1985); C.H. Douglas, Economic Democracy (Surrey, England: Bloomfield Books, 1974); J.W. Smith, Economic Democracy: The Political Struggle for the Twenty-first Century, 4th edition (Sun City, USA: The Institute for Economic Democracy, 2005); David Schweickart, After Capitalism (Lanham, MD: Rowman and Littlefield Publishers, Inc., 2002) and Robin Archer, Economic Democracy: The Politics of Feasible Socialism (Oxford: Oxford University Press, 1995).

(47) David Schweickart, After Capitalism, 2002, pp. 22-3.

(48) Robin Archer, Economic Democracy, 1995, p. 5.

(49) Ibid., p. 45.

(50) Westey Hohfeld, "Some Foundamental Legal Conceptions as Applied in Judicial Reasoning", Yale Law Jornal 23 (1913).

(51) David Schweickart, "Economic Democracy: A Worthy Socialism that Would Really Work", Science and Society 56, no. 1 (1992): 9-38.

Jiefen Li ( is a Research Assistant in the Department of Languages and Cultures, Division of Humanities, at the Otago University in New Zealand. She has a PhD in Contemporary Chinese Studies from the Scottish Centre of China Studies at the University of Edinburgh. Her research interests include China's business environment and culture, China's legal system and the business-government relationship in China.
Table 1. Restructuring of Taxi Services in Beijing

                              No. of Taxi
           Year                Companies            No. of Cabs

1992                              259                 10,000
1994                             1,400                60,000
1996 regulation to restrict market entry through taxi company monopoly
2000 merger and acquisition       270          67,000 with 12 brands
                                            * 1,000 independent drivers

Source: Zhongguo jingji shibao (China Economic Times), 6 Dec. 2002.

Table 2. Income Difference between a Company Driver and an Individual
Driver (yuan)

                        Company Driver        Individual Driver

Investment                  40,000              Total: 75,000
(risk guarantee)                                (car 67,000;
                                                 licence and
                                               equipment etc.
                                                around 8,000)

Monthly Income              9,000                   9,000

Expenditure              Total: 7,100           Total: 2,700
                     (monthly rent 4,400;   (taxes and fares 800;
                     petrol 1,800; repair    maintenance 1,900)
                     400; food 300; fines
                      100; and warranty
                     check, taxes, etc.)

Monthly Net Income          1,900                   6,300

Investment Return            zero            Deduction of labour
Rate                                           hours, monthly
                                            return of investment
                                                 rate 5,000

Source: Zhongguo jingji shibao (China Economic Times), 6 Dec. 2002,
p. 2.
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Author:Li, Jiefen
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Date:Sep 1, 2010
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