Thousands of Chinese taxi drivers who went on strike over pay in the eastern hub of Hangzhou returned to work on Wednesday after accepting a government deal, the city's biggest taxi company said.

Authorities in the popular tourist area have offered to raise fares by October and provide subsidies to drivers in a bid to end the strike, which had crippled the city.

"The dispute is basically solved. I just went to the sites where the strike took place and not many taxis were there," said Shou Minglei, a manager at the Hangzhou Zhongrun Taxi Company, which runs a fleet of more than 1,000 cars.

However, state news agency Xinhua said some drivers were still holding out.

China has suffered several labour actions by taxi drivers and transport workers over pay in the past three years.

Drivers have cited an array of grievances including high fuel prices and fees they must pay to their companies. The government fears grievances over rising prices could fuel wider social unrest.

Taxi driver protests hit two Chinese cities
Shanghai (AFP) Aug 1, 2011 - Thousands of taxi drivers in China's eastern city of Hangzhou went on strike Monday over high petrol prices and traffic congestion, while drivers in Shanghai also protested over benefits.

In Hangzhou, drivers parked their cars at several locations in the city, a major tourist centre, while others simply stayed on the road and refused to take passengers, state media and taxi company officials said.

Some media estimates put the number of strikers as high as 4,000 drivers. Police declined to comment.

The official Xinhua News Agency cited a driver as saying his income had been hurt by high fuel prices and traffic jams, which limit the number of passengers he can pick up during a shift.

"We know the strike is going on. We told our drivers not to participate," an official from the Hangzhou Jingwei Taxi Company, who declined to be named, told AFP.

Hangzhou, known for the scenic West Lake, deployed extra police and closed some roads because of the strike, whose start coincided with the morning rush hour.

Calls circulated anonymously on the Internet for the Hangzhou strike to continue for a total of three days.

In Shanghai, drivers from one of the city's smaller taxi companies, Fuxin, parked along a major road in a western suburb with signs posted in their windows protesting what they claimed was a lack of retirement benefits, local media reported. The company said it was negotiating with the drivers.

In April, truck drivers in Shanghai also went on strike over rising fuel costs, disrupting operations at the city's ports.

China's consumer price index rose an annual 6.4 percent in June, the highest level in three years, and the government is worried about the potential for rising prices to cause social unrest.

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