Rattled authorities in China's eastern city of Hangzhou have heeded the demands of thousands of angry drivers by hiking taxi fares as concerns grow over social unrest caused by rising prices.

The eastern Chinese city will raise taxi fares in October, state media said Friday, after the strike in August.

The two-day stoppage in the city, which is a major tourist destination, was over a host of grievances including high fuel prices, traffic congestion and fees the drivers have to pay to the companies that run taxi services.

The city government, wary of social unrest, sought to defuse the protest by immediately offering a temporary subsidy and promising to raise fares at a later date.

It has now decided to raise the minimum fare to 11 yuan ($1.7) from the previous 10 yuan from October 20 and increase payments made to drivers for longer distances and waiting time, the Zhejiang Daily newspaper said.

China has experienced periodic strikes by taxi and truck drivers, mostly over soaring expenses.

Inflation in China hit a three-year high of 6.5 percent in July and Beijing worries about the potential of rising prices to spark social unrest.

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

The Zhejiang Daily said the Hangzhou government approved the plan after a public hearing.

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