Bike Passport Please

In Hangzhou, the kids and I set off on our own to bike around West Lake.  Biking around the lake was touted as one of the top ten things to do.  I loaded up on Chinese currency (what I thought was a lot) and found the bike kiosk, of which there are many in the city.  The woman at the kiosk took one look at my face and handed me a laminated sheet in English.  The rules were simple enough except for two things: the price seemed outrageous for China, charging $17 a day plus $34 deposit per bike....and while I'd brought just enough money, I didn't have the necessary document.
"You need my passport?" I asked, thinking this isn't international travel, just a ride around the lake.
The woman said I could just write down the passport number and that would be good enough.  The kids frowned.  Nobody could remember their numbers.  I quickly made up a sequence of passport-like numbers.  It wasn't as if we were going to run off with these bikes.
Later, when we tried to return the bikes to the same kiosk it was a fiasco.  Although she was standing right in front of us, she insisted she was closed.  I would have left our bikes and gone on, but I kind of wanted my deposit back.  She said we could return the bikes somewhere else.  We went there.  That kiosk was "closed" too.  So we tried a third one.  The third one was the charm.  Not only did the lady return our deposit, but she returned most of the daily-use fee.  Instead of $17, she only charged us 1.70.
What was that about?  My brother-in-law said that we'd met a kind kiosk woman, someone willing to treat us as locals rather than take advantage of our foreign status.  He said the passport issue is common.  Some amenities (like bus passes, store ownership, reasonable prices) are only granted to Chinese citizens.