An owner of one taxi company in Wuhan said the payment goes to the account of the city's taxi management division, which is affiliated with Wuhan's transport commission, but Chen denied this.

"Not a single penny goes to the account of the taxi management division," Chen said.

Xue Hongwen, director of Wuhan's supervision bureau, told the news conference that the government is investigating the purchasing procedures and will make its findings public once they were complete.

Yang Shouxin, a professor in economics law at Zhongnan University of Economics and Law, said: "The malpractices exposed in the program, such as the government designating specific types of car as taxis, represent a government monopoly.

"Many local government interests are involved in making such regulations."

He said the reason that most taxis in Wuhan are the products of Dongfeng Peugeot Citroen Automobile Co is that the Wuhan government wants to support the development of its local enterprises.

"This kind of monopoly doesn't only exist in the taxi sector in many cities. It also exists in many other sectors such as oil and power industries," he said.

Regulations for taxi management issued by the Beijing government also stipulate that taxi operators must use cars permitted by the government.

"There are three to four major brands of taxi in Beijing, including those produced in Beijing," one taxi driver, who asked to be anonymous, told China Daily.

He said he pays his company 5,175 yuan a month, and clears about 4,000 a month.

Yang added: "It is right for the government to improve the management of the taxi sector.

"But monopolies should be eased as they interfere with fair competition in the sector and can result in harmful consequences such as the safety hazards being exposed in Wuhan.

"Market-oriented policies should be increased in these heavily monopolized sectors, which is a challenge for the government," he said.

Contact the writers at zhoulihua@chinadaily.com.cn and wangxiaodong@chinadaily.com.cn

Tian Jingwen in Wuhan contributed to this story.