ZHANG Xiaoning

Professor of Tongji SEM, Doctoral Supervisor

As recently as the first half of 2017, urban rail transit has covered as many as 31 cities in mainland China, with the operating mileage being 3,965km. 11 cities have put into service modern trolley buses, overall operating mileage being 233km. 53 urban railway systems are in construction, with a planned track length of over 9,000km and 5,770km already in progress. By the end of this year, Xiamen and Guiyang are going to place into use their urban rail transit systems, adding 699km to the total operating mileage in the mainland. Besides, both the lengths of urban rail tracks in Beijing and Shanghai have exceeded 500km. Urban railway systems in these two cities have undertaken over half of their respective public transport passenger volumes. There are in total 3 cities in the mainland, Beijing, Shanghai and Guangzhou, whose urban rail transits are carrying over 50% of the passengers in their own public transportation. As can be seen, urban rail transit has become the backbone of urban transport.

From 2015 to 2016, the total amount of special funds for the construction of urban rail transit in China reached ¥201bn. In 2020, the total mileage of rail transit in Chinese cities is going to reach 6,000km. During the 13th Five-Year Plan period, urban rail transit is still the focus of urban infrastructure construction. China, the world’s largest urban rail transit site, is not only witnessing the internationalization of its engineering construction, equipment manufacturing and operations management, but also participating in the research and establishment of international standards in this field. The manufacturing system and industry of urban rail transit, dominated by localized equipment, have gained international influence. All of these prove the significance of urban rail transit in the development of cities.

However, fund raising has become a difficulty due to the high cost and low profit of urban rail transit construction. While increasing investment, local governments need to keep an eye on their own finance in order to guard against financing risks. Although investment is an important drive for GDP, there should be limits since the old stimulus policy does not apply now. China should beware of excessive metro construction.

For the past few years, the construction of urban rail transit has been triumphing all the way. During the 2016 local Two Sessions, provinces and cities revealed their trillion-worth infrastructure investment lists, of which the highest proportion goes to rail transit. New investments are needed for the development of local economies, and rail transit, as a huge investment project, is an effective way for local governments to boost the growth of GDP. In addition, with the delegation of the approval power, the approval process as well as the preliminary work of the rail transit projects have been accelerated significantly.

However, the high investment as well as high operating cost of rail transit have put a burden on local financial resources. In recent years, many cities have posted deficit bills and have therefore increased ticket prices as a result of the deficit in metro operation. Take Beijing as an example. According to public data, from 2007 to 2013, Beijing Government subsidized Beijing Metro Company with all kinds of financial funds, totaling ¥22.1bn. In 2013 alone, the financial subsidy covered a basic operating loss of ¥2.6bn as well as the renewal and reconstruction expense of almost ¥2bn.

For central provinces, the operating cost of rail transit takes up a large proportion of their financial expenditures. So far, there has not been any successful operating model and metro lines in inland cities are still in their exploratory phases. Cities with financial difficulty and low population density in China’s central and western regions are advised to make decisions within their capabilities. In the cases of better-funded places, some local governments found it hard to stay on the path to sustainable development when they faced a long bill of building costs, interests and operating costs after borrowing to build metros. It is then advisable for local governments to refrain from competing against each other with adherence to its economic conditions and transport demands. With the increasing cost of land acquisition, labor and building materials, there has been a surge in the expenditure of metro construction. Under such circumstances, local governments are suggested to make the right decision according to their own economic and financial strength as well as the demand of their urban public transports. As a result of the expansion of urban rail transit network, local governments in China provide an increasing amount of operating subsides year by year, which should bring local governments’ special attention to the financial sustainability of the project in order for them to choose the appropriate public transport systems and modes from the perspective of project life cycle.

In 2003, the General Office of the State Council promulgated the Notice of the General Office of State Council on Strengthening Construction Management of Urban Rail Transit Network. In the notice, it was stated that “Cities applying for metro projects should meet the following standards: general budget revenue of the local government exceeding ¥10bn, GDP above ¥100bn, downtown population over 3m, one-way passenger flow volume of planned routes in peak hours reaching 30 thousand per hour. Cities applying for light rail projects should meet the following standards: general budget revenue of the local government exceeding ¥6bn, GDP above ¥60bn, downtown population over 1.5m, one-way passenger flow volume of planned routes in peak hours reaching 10 thousand per hour. Light rail projects in megalopolis with good economic conditions are preferentially supported to mitigate their problem of traffic congestion.”

In the past 15 years, however, the above economic indicators have no longer been effective in restraining the application standards of urban rail transit projects in China because of the rapid development of economy, accompanied with inflation and the rising prices. What’s more, due to the infeasibility to set the passenger flow volume as a hard indicator in the application and construction period, the majority of those completed metro lines have not met the required passenger flow volume for it can only be measured after a line is opened. Therefore, the only true indicator is population, which can also be deceptive since some cities simply counted in the suburban population to make up the numbers. All of these led to the pointless competition between cities that actually do not need metros or other urban rail transit systems. The unchecked construction has increased their own debt burden.

Since 2012, the research group of Professor Zhang Xiaoning of Tongji University had looked into various factors, including traffic demand, financial balance, social benefit and the ability of sustainable development, and therefore suggested the criteria and process for assessing the applications of rail transit project. The basic factors of the criteria are urban population scale, GDP, general budget revenue of the local government, passenger flow volume per unit length, urban built-up area, and peak-hour volume. Based on this, the team came up with an assessment process of three modules, namely, application for rail transit construction, first application of rail transit construction and non-first time application of rail transit construction. The suggested process is believed to be not only efficient in identifying qualified applications, but also able to promote a rational development of urban rail transit in China. Results of this research can be referred to in A Study on the Demand of Urban Rail Transit Construction (2014), the doctoral dissertation of Shang Bin, a PhD candidate supervised by Professor Zhang. The content of the proposed criteria is listed below: Cities applying for metro projects should meet the following standards: general budget revenue of the local government exceeding ¥35bn, GDP above ¥220bn, city population over 7.5m, one-way passenger flow volume of planned routes in peak hours reaching 30 thousand person-times per hour, and urban built-up area reaching 200km² (150 km² if similar to a belt-shape). Cities applying for light rail projects should meet the following standards: general budget revenue of the local government exceeding ¥15bn, GDP above ¥110bn, city population over 3.5m, one-way passenger flow volume of planned routes in peak hours reaching 10 thousand person-times per hour, and urban built-up area reaching 100km².

Recently, multiple metro projects in Inner Mongolia have been closed down, including the project in Baotou which was already in construction phase. According to Caixin, a Chinese media, Primary Industries Division of NDRC is working on revising the Notice of the General Office of State Council on Strengthening Construction Management of Urban Rail Transit Network, which was promulgated in 2003, aiming at tightening the approval rate of rail transit projects. In August 2016, the estimated ¥30.689bn investment of Metro Line 1 and 2 in Baotou was officially approved by the State Council against the backdrop of the frequent approvals of Chinese infrastructure projects in a row. However, according to public information, the permanent population in Baotou never reached 3 million. It was reported by Caixin that, in August 2017, the project, due to the mismatch between the huge fund it needs and the fiscal revenue ability of the local government, had raised attention in the central government, and was then called off and suggested to devote local investments to more urgent areas such as business development and people’s livelihood.

Other halted projects include the first-stage metro project of Line 3 and 4 in Hohhot, the S27 expressway project from Hohhot to Ordos and the new airport project in Hohhot. The investment volume of each project above is over ¥20bn, while the revenue in Hohhot’s general public budgets totaled only ¥26.97bn in 2016. Apart from Inner Mongolia, the government of Xianyang recently declared that its metro project had not been approved by NDRC and would probably stay this way until the end of this year. The same thing happened to Wuhan, as it was disclosed by Wuhan Municipal Development and Reform Commission that its rail transit project declared earlier this year had not yet been handled. All of the above not only confirm my concern about the excessiveness of metro construction, but also prove the result of this research.