In reality, however, local authorities cannot ignore the potential risk of social unrest if a large number of cabbies go on strike in protest. In fact, local officials would rather do without the political repercussions of such “industrial action”.

Facing the pressure from cabbies, some local authorities have understandably banned high-end car services provided by car rental companies. But despite being understandable, such moves do not necessarily make legal sense. Local policymakers may find it easy to ban such services, but by doing so they are thwarting innovation in business and compromising efficacious distribution of resources by the market.

Actually, catering both to taxi drivers and providers of the new car-hiring services would be the ideal solution to the problem. For long, cabbies in many cities have been complaining about their low incomes despite working overtime. They have gone on strike in some cities even before the taxi-hiring companies achieved success. However, local authorities have failed to properly address their problems. The apparent cause of the cabbie strike in Shenyang is the emergence of taxi-hiring companies. But the root cause is the local authorities’ failure to solve the long-standing problems of the taxi drivers.

The main problem of the cabbies is that they have to pay a large part of their incomes to their companies and cannot operate on an individual level even if they want to. The fact that operational and managerial costs of taxi companies are often opaque also makes taxi drivers believe that they have been cheated out of their fair share of income.

Since the unequal distribution of income between taxi drivers and their companies is the main problem, the local authorities have to find a real and effective solution to appease the cabbies. Otherwise, poorly paid taxi drivers may organize more protests even if the apps-based car-hiring services are banned.

The author is a senior writer with China Daily. xinzhiming@chinadaily.com.cn