Beijing taxis reform long overdue

Beijing's recent advice on strengthening taxi management to improve services has drawn widespread attention. With a series of comprehensive measures, the municipal government hopes to end difficulties in hiring cabs within two years, according to a People's Daily article.

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Factors such as an imbalance between heavy demand and supply, and severe traffic jams, have contributed to the difficulties in hiring cabs in cities.

But the crux of the problem lies in taxi management rights. Monopolistic cab companies make profits by collecting taxi rentals through administrative intervention, placing a heavy burden on taxi drivers, and resulting in a lack of motivation in some cab companies to adapt to market demand.

In Beijing's case, as management rights become due, taxi companies with a higher complaint rate may be persuaded to quit, while those offering service of a higher quality, and with better operating conditions, are likely to be granted more licenses. Such measures would mean introducing an "exit mechanism" in the taxi industry where only the fittest survive.

It will straighten out management and positioning in the taxi industry and the relationship between government and the market. Whether measures suggested in the advice are implemented, and rights fairly distributed, will be the key to the success of the reforms.

Under such reforms launched in other cities, an annual inspection system cuts taxi numbers according to complaints received and violation of regulations, but no company is kicked out of the industry as punishment.

Previous experience also tells the Beijing authorities that genuine implementation of the advice will start with breaking down vested interests, which might be a harder, but more significant, step.