* More taxis seen on streets in central Hangzhou
* Protest led mostly by migrant workers
* Highlights growing unrest among the growing workforce (Adds more comments from drivers, researcher)
By Melanie Lee
HANGZHOU, China, Aug 3 A strike by Chinese cab drivers in the eastern tourist city of Hangzhou stretched into a third day on Wednesday, highlighting frustration by migrant workers nationwide struggling with high costs.
More than 100 drivers, mostly from heavily rural central Henan province, as well as their families, gathered under a bridge in the suburbs of the scenic city about 190 km (120 miles) southwest of Shanghai, demanding higher wages.
About 1,500 disgruntled taxi drivers started the strike at rush hour on Monday morning, according to state media. Cabbies said many thousands more have since joined, but more taxis were seen on roads in the city centre, a popular tourist destination with the famed West Lake, on Wednesday compared with the previous day when they had all but deserted the area.
The strike in Hangzhou follows a series of similar protests by taxi drivers in other cities across the nation, demanding higher wages as well as unrest among young migrant workers who make up a growing share of the country's workforce.
"They tell us, 'if you are so unhappy, why don't you go back.' They don't treat us seriously because we are not from here," said a Hangzhou driver, who appeared to be in his late 40's and who declined to give his name.
"I have been driving for a long time, and this is the first time I have been on strike. But with fuel price rises, it is getting too expensive," he said.
Taxi industry reform is seen as difficult because of lax effort to help drivers and passengers by government agencies that tend to work instead with business owners, said You Chenli, a researcher at privately funded think thank Transition Institute in Beijing.
The Transition Institute, in a recent study, said there have been nearly 60 taxi strikes in Chinese cities in recent years .
"The government's regulatory agencies and the companies form an interest coalition, and so there's reluctance to harm the interests of the companies," said You, whose institute has studied China's taxi industry and urged reforms.
The real key to a solution is breaking up the monopolistic operation of the sector and allowing anyone to enter it on fair terms."
Taxi drivers in Hangzhou say they make about 500 yuan a day ($77), but pay out nearly 80 percent of that in fuel and vehicle rental fees.
China's consumer price index hit a three-year peak of 6.4 percent in June, with leaders in Beijing saying that fighting inflation is their policy priority.
China's 150 million or so rural migrant workers have gained better wages and treatment in recent years, but the gap between them and established urban residents remains wide, fuelling anger about discrimination and ill-treatment.
"Driving taxis is the only thing I know how to do. What is there for me to do if I go back to Henan?" a 42-year-old driver said in his tiny apartment where his wife and three children have lived for the past four months. Their twice-a-day meals consist of steamed buns and garlic paste prepared in the kitchen which doubles as a bathroom.
Hangzhou city's transportation bureau has promised to raise taxi fares by the end of October and offer a temporary fuel subsidy of 1 yuan ($0.16) per trip, which many cab drivers say is too little.
Other city governments in the face of strikes or labour unrest have raised fares recently. Shanghai, the country's most populous and expensive city, boosted fares by 2 yuan last month.
But local governments are also wary of upsetting consumers by raising fares, according to You Chenliat, another researcher at the Transition Institute.
"These days, the government is more afraid of offending consumers, but in the end it is them who carry the costs," he said.
(Additional reporting by Chris Buckley in Beijing, Writing by Kazunori Takada; Editing by Jacqueline Wong)