Taxi fahren in China. Hochinteressanter Erfahrungsbericht! VWL in der Praxis ;-)

verfasst von nasdaq10000, 18.08.2003, 18:11

-->China: A Journey to the West

Andy Xie (Hong Kong)



It was a hot morning in Hefei, the capital of Anhui Province. I didn’t want to take a bus to Anqing, a small city by the Yangtze River. The bus would be air-conditioned. But too many passengers would be puffing all the way to Anqing. I just couldn’t stand the prospect of all that smoke.

I called over a taxi and inquired how much the 200-kilometer journey would cost. The driver, a young man with dark skin and a stocky physique, asked for 500 yuan (US$60.4). I agreed. My cab would have to come back empty. Most Chinese cities ban cabs from other cities from picking up passengers. The tolls would cost 100 yuan. In effect, the driver was getting 1 yuan per kilometer from me.

Taxi fares vary greatly across China. In Shanghai, it is 3 yuan per kilometer, and in most interior provinces along the Yangtze River it is 1.4 yuan. Hong Kong taxis charge HK$7 per kilometer, or 7.4 yuan. Even though gross revenue for China’s taxicabs varies greatly with local economic conditions, the net income for taxi drivers varies much less. High gross income attracts intermediaries who collude with local governments to siphon off the surpluses by manipulating the rules of the game.

I struck up a conversation with the driver. He bragged that he graduated from a technical college five years ago with a degree in electronics. He worked at an electronics trading company but left when his relatives pulled together enough money to buy a taxi medallion and a car. The total investment was about 110,000 yuan (US$13,390), an astronomical sum for Hefei. His relatives probably had valuable connections. I didn’t ask.

My driver was 25, married and expecting a child soon. His biggest worry was education for his unborn child. “I could never afford another child,” he shouted, after listing the costs of education from kindergarten to college. Chinese parents usually pay for their children’s education to the best of their abilities. It is the only product in China with low price elasticity, in my view. China’s education system is profiting from the willingness of parents to pay exorbitant fees. If China does not make education more affordable, the country’s population could collapse in the coming decades.

Taxi drivers in China work longer hours than in any other job. I asked if he thought about changing his job after having a child. “I make 35,000 yuan every year. There are no other jobs that pay so well,” he exclaimed. “Don’t forget the car becoming worth less over time,” I reminded him. He thought that the depreciation cost was probably 10,000 yuan per year; his car had run 500,000 kilometers already.

“You could sell your medallion and earn interest on its value too,” I tried to get him to think my way. His medallion was worth 70,000 yuan, appreciating from 10,000 five years ago. I tried to convince him that his net labor income was actually 20,000 yuan per annum. If measured by income per hour, he could make more by driving for a foreign company in the area. “What would I do with my time then?” he asked.

“I want to be a businessman”, he suddenly confided. I asked him what he had in mind. “What about property? I hear it’s easy to make money in property,” he replied. “Don’t believe everything you hear. People who lose money don’t tell you,” I cautioned. “I bought a property two years ago. It’s worth 30,000 yuan more now,” he replied, with a big smile on his face. I didn’t know what to say. The guy had a better investment track record than me. I was thinking fast: “Am I seeing Hefei’s future Li Ka-shing? Should I pitch for the IPO mandate now?”

Suddenly, the car was vibrating violently and making horrible noises. The driver stopped the car on the shoulder. It was a flat tire, which took five minutes to replace. When we got back on the road, the driver looked worried. He said that he had brought only one spare tire and we would be in big trouble if another tire blew up. I thought that he was being too cautious.

I gave him 100 yuan extra when we arrived, as the poor guy would have to buy a new tire. He beamed at the money. I thought it odd. The tire would cost more than 100 yuan. Why was he so happy with the money?

About ten minutes after I checked into my hotel, I took a cab to the riverfront. Sitting right next to me was my Hefei driver. I asked him what he was doing. He said that he was taking his bad tire to a local repair shop and a local cab driver offered him a free ride but with a paying customer. I asked him how much it would cost to fix the tire. “About 5 yuan,” he replied. It turns out that bad tires are always glued back together in China.

I went to the bus station for the 400-kilometer trip to Wuhan the following day. The next bus to Wuhan was one hour and a half away. I asked the salesperson if the bus had air-conditioning. She replied that the bus operator said so. I became suspicious and asked what kind of bus it was. She said it was a van that could seat 16. I realized it was an old one; new buses usually seat more passengers. I checked with her again if the bus was okay. She said yes and gave me the bus’s brand name. But I didn’t recognize it. I had no choice, though, and put down 60 yuan for a ticket.

The hallway speakers were blaring out a Kylie Minogue tune. The weather was getting hotter. I saw a big glass door inside the bus station with a sign on the front: “Air-conditioned Waiting Room for One Yuan”. I went inside and paid 1 yuan to a middle-aged woman behind a counter in the back. The room was about 50 square meters and was not much cooler than outside. There were two standup air-conditioners on two inside corners. Only one was on.

I asked the woman if she could turn on the other. “Are there enough people to pay for two?” she shouted at me. I looked around and saw about 10 people. Her revenue was probably insufficient to pay for the electricity for one. Forget about the place’s capital cost or her salary. Someone was subsidizing me. I stopped complaining and stood next to the running A/C.

Two guys came in. “One yuan each,” the woman said. “You charge money?” they asked and began moving slowly to the running A/C. The woman rushed over and pushed them out. “Trying to get cool air for free,” she shouted angrily.

I went outside. I asked someone where the bus to Wuhan was. “That’s the boss,” he pointed at a tall man smoking a cigarette. I walked over and asked for his bus. He pointed at a van that looked 20 years old. “Does it have A/C?” I asked suspiciously. “It has a great A/C,” he exclaimed with a big smile. “But don’t get on now. We just turned it on. Let it run a bit”, he advised.

The boss looked about 50. His face was dark, shiny and pockmarked. His hair was nicely combed. He wore a purple polyester polo shirt, navy cotton pants, worn-down black leather shoes and white socks. He was trying to look respectable.

I went aboard after a five-minute wait. Some passengers were on board already. I sat down on a single seat on the right. The first thing I noticed was a big red sign above the windshield: “If you kill a highway robber, it is ok.” “I should have brought my Swiss knife,” I thought to myself.

I couldn’t help notice the driver. He had a shaved head with a neatly folded wet towel perched on top. Only prisoners had shaved heads in China merely 10 years ago. He had light skin, goldfish eyes and a thick neck. He wore a crumpled shirt and torn jeans. He was stuffing himself with a huge bucket of steamed rice with some meat toppings. Every time he pushed down a mouthful of rice, he rolled his eyeballs and then stared straight ahead. He would then take a gulp of tea from a stainless steel jug with a loose cover on his left. He added hot water into the jug from a thermal flask on his right from time to time. I was glad that my seat was far from his thermal flask.

A woman came onboard. “Go home,” she shouted at a thin man standing beside the van. She was small but had a big voice. That man outside was smoking and pacing nervously. The veins on his neck were pulsating. He suddenly threw away his cigarette, burst onboard and dragged the woman away. They disappeared into the bus station.

The boss came aboard. “We have great A/C,” he smiled at everyone. The driver had finished with his rice. He lit a cigarette, put on a pair of shades and was ready to go. “Let’s wait a bit. That woman that just left will be back. She has no alternative,” he said confidently. Sure enough, the woman came back. “Go home,” she shouted at the thin man again while sitting down. “We have great A/C,” the boss smiled at the woman.

We took off. I counted nine paying passengers. The A/C wasn’t great but was working. We soon stopped at a toll station. Many people were trying to climb aboard the buses going through. A young man boarded our van. “Forty yuan,” the boss shouted. “Isn’t it 25?” he replied while looking for a seat. The van was out of the station already and was moving ahead slowly. The boss stood up and tried to push the young man off the van. He was pushing so hard that I was worried for the man’s safety. “Thirty,” the young man suddenly said. “Okay,” replied the boss, immediately pulling him back.

The van was cruising nicely at 100 km per hour. The driver was chatting with the boss, commenting on the cars passing by. Decades of smoking had severely damaged his vocal cords. He sounded like Marlon Brando in The Godfather. Many actors trying to playing bad guys could never look as convincing as he did.

A new Toyota van zipped effortlessly past ours. We all stared at it, longing for the A/C behind its tinted windows. Our driver was not amused. He pulled the wet towel off his head, leaned forward, and stepped hard on the gas pedal. The van shook and began to accelerate. We feared the worst. “No problem,” the boss consoled, “we have never killed anyone in over 20 years of our driving career.” All I could think was that 70,000 perished in traffic accidents in China last year.

The Toyota slowed and allowed us to pull far ahead. Its driver was probably spooked by our van’s strange behavior. Our driver looked relaxed. He put the wet towel back on his head and lit a cigarette. He was chatting with the boss again, laughing heartily from time to time.

“Ah-ya-ya,” he suddenly shrieked. Thick smoke came from his direction towards the back. I instinctively tried to open the windows. But they were stuck. The driver stopped the car on the shoulder and furiously flapped his wet towel. The smoke finally dissipated.

“No problem. Our mechanic wired together the wrong parts,” the boss said gently with a big smile. “After giving it a rest, we will be back on the road.” After about five minutes, the driver tried to start the van. It didn’t budge. “Someone had better push it for me,” he said, looking back. The boss and I went down and pushed the van forward until it started.

We soon noticed that the A/C was dead. “It probably burnt out,” the boss apologized. The driver opened the front windows. The air flushing in was so hot that the boss was perspiring profusely. The driver, however, was enjoying it. He put the wet towel back on his head and started singing.

It suddenly poured. Before we could close the windows, the boss sitting in the front was already soaking wet. We couldn’t breathe with the windows closed and had to open them again. The boss kept smiling, raindrops flowing down his face. Thank the heavens, the rain didn’t last.

The van finally pulled into Wuhan after five and a half hours. The boss stood up and passed out his plastic business cards. “Our bus goes back to Anqing at 7:30 pm sharp every day. I can pick you up at a designated location,” he offered. When we finally stopped inside the Wuhan station, I asked the boss how he would take his van back in the evening. “It will be like new,” he bellowed.

The boss had gross revenue of 570 yuan for the trip. He paid 150 yuan for gas and about the same for tolls. The bus stations probably took 100. His net income was about 170 yuan. Assuming that he would get the same for the returning trip, he could split 340 yuan (US$41) with the driver everyday. His capital cost was truly zero. The boss and his driver were making a good living.

Because the cost of repairs is so low - a consequence of labor oversupply - old vehicles never die in China. They are always patched up and put back on the road. They erode profitability for new buses. When old equipment has zero depreciation cost and can be fixed cheaply, it leads to an employment opportunity. As long as labor is in surplus, someone will operate the equipment. Labor effectively becomes a substitute for capital with the help of old equipment. When the labor surplus is large, economics can surprise in strange ways.

China’s National People’s Congress is trying to put together a traffic safety law. The debate over the bill has focused on driving behavior. China’s 70,000 deaths last year from traffic accidents compared to 50,000 for the US, even though China has one-sixth as many vehicles as the US. China could cut traffic accidents dramatically by banning old vehicles and illegal car parts. I suspect that most traffic accidents in China involve one of the two.

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• Taxi fahren in China. Hochinteressanter Erfahrungsbericht! VWL in der Praxis ;-) - nasdaq10000, 18.08.2003, 18:11