The well organised protest started during the morning rush hour, the cab drivers parked their taxis in prominent locations around Hangzhou and refused to carry passengers.
Nearly 1,700 taxi drivers were involved and the protest was still growing in the afternoon, said one witness.
Witnesses say there was a heavy police presence watching over the scene and there had been a few erratic incidents in which striking drivers through plastic bottles at taxis that refused to join in with the protest.
Chinese state media said traffic officials and local police had been dispatched to speak to taxi drivers about their grievances and to “maintain order”.
In a district of Shanghai on Monday, there had also been a smaller protest by taxi drivers who were complaining about low wages.
The cost of living has soared and the average income for taxi drivers in big Chinese cities has barely risen in the last 10 years. Most drivers are required to pay for their own taxi insurance and hand over the bulk of their earnings to taxi companies.
In June, consumer inflation hit a 3 year high of 6.4% and food inflation jumped 14.4% from the same month a year earlier.
Truckers at a container port in Shanghai staged a strike in May, to protest over rising fuel costs and expensive port fees, prompting a swift response from authorities who waived most of the fees but also sent in paramilitary units to break up the strike.
Last year, taxi drivers were striking and complaining about no access to social services and stagnant wages, in a number of regional cities across Chine, including Chongqing and Sanya, an island resort town.
The minimum taxi charge of Rmb10 (approximately $1.55) has not been increased for the past 8 years in Hangzhou.
Fuel prices have been set by the Chinese government under a mechanism that is linked to international crude prices, but in practice price-setting is also influenced by things like social stability and inflation. At the moment, prices of diesel and petrol in China are at historic highs and have not been lowered this year even though the price of Brent crude has fallen 6% from its peak in April.
Taxi drivers can easily communicate with each other through radio to organise a strike, therefore in recent years, they have been relatively quick to air their grievances.