Nov 29, 2011 03:15 PM

Monopolies Behind Beijing's Parking Lot Blues


Two czars of the parking business in car-crazy Beijing have been arrested in a case that underscores the seriousness – and perhaps one cause – of the city's massive parking shortage.

Jia Wei, the now-deposed chairman of state-owned Gonglian Anda Parking Management Co., was charged with accepting 2 million yuan in bribes between August 2006 and May 2010 from Qi Li, a private car-park manager.

In exchange, according to investigators, Jia transferred Anda's 56 percent stake in Beijing Gonglian Shunda Intelligent Parking Management Co. to a private company run by Qi for 17 million yuan in 2007.

Shunda, which controls more than 60 percent of Beijing's 50,000 streetside parking spots, was then privatized, becoming Qi's personal asset.

The Beijing Second Intermediate People's Court has convened twice to hear Jia's case, and a verdict is expected soon. Qi's court hearing is pending.

Yet the case has changed nothing for Beijing drivers who battle every day to park nearly 5 million vehicles in lots and on streets where the parking slots total just 740,000.

Officials say the Jia-Qi transaction involved registered parking spaces on Beijing streets, which can command fees of more than 10 yuan an hour, as well as some unregistered spots.

A parking business source said the Beijing municipal government had signed off on Jia's plan to transfer Shunda to Qi, apparently in hopes a private operation would improve street parking management and boost the city's image during the 2008 Summer Olympics.

But the company remained a monopoly, and rather than leading to improvements, the transfer to Qi has been followed over the years by repeated claims of bad service. Parking lot attendants, many of them poorly trained and underpaid, were accused of offending drivers and sitting idly as parked vehicles were bumped, scraped or stolen.

Shunda's financial picture has raised questions as well about Qi and honesty. The company reported a 1.5 million yuan profit for 2009, but industry sources say that's probably a dramatic underestimate.

Thus, privatization of Shunda did not make parking in Beijing any easier, although investigators argue it made Qi a lot richer.

No Competition

Anda was created by the Beijing government in 1998 to streamline financing and construction of the city's Fourth Ring Road. Under a central government directive, full management of parking lots in Beijing was transferred to Anda from the city's Department of Transportation.

Beijing's parking headaches started to gel in 2000, as increasing numbers of residents stopped riding bicycles and started driving cars. Parking slots were carved from city streets, and soon became enormously popular.

Shunda was formed in 2002 as a joint venture between Anda and Qi's concern, Beijing Jing'en Technology Development Co., to run the on-street parking business. Five years later, a notice on the Beijing Equity Exchange announced the public transfer of 56 percent of Shunda's shares – the deal that investigators said was preceded by Qi's initial bribing of Jia to win exclusive rights to Anda.

Several private parking company owners told Caixin they would have been interested in Anda, but they were not allowed to bid since only Shunda met the conditions. According to bidding rules, the buyer should have "more than five years of experience in Beijing roadside parking management," which excluded Qi's competitors.

Private company owners said several hundred parking companies operated in Beijing in 2007, but Shunda had been allowed to monopolize the street market.

Meanwhile, murky financial reports clouded Shunda's status. Even though Beijing hiked street parking prices to 10 yuan per hour or more from 2 yuan in 2010, Shunda said its revenues did not increase. The company also paid less to the Beijing Financial Administration in street-use fees, handing over 21.1 million yuan in 2010 compared with 33.7 million yuan the year before.

The financials gave an impression of a struggling company. But an industry source said Shunda's secret to moneymaking has been to hold down costs, especially labor costs.

The company created zones and found subcontractors to manage each. The managers then hired low-wage attendants among the ranks of the unemployed, retirees or unskilled workers from the countryside.

One advantage is that these low-paid attendants are motivated to collect fees. But a downside is subcontractors have been known to find ways to illegally expand parking areas they oversee, or hike fees unilaterally and pocket the difference.

One industry insider said based on 80 percent daytime and 50 percent nighttime occupancy for nearly 30,000 registered parking spaces, for which 2 yuan is charged per hour, the company's annual revenue was probably more than 200 million yuan before 2010.

And after the city hiked parking fees, revenues probably jumped to at least 500 million yuan – not including revenues from unregistered parking spaces.

An executive from a former large, state-owned Beijing parking company, who declined to be named, said he had contracted to operate more than a dozen residential parking areas with less than 10,000 parking spaces total.

"I was managing small parking lots that large car parking companies would look down upon, those with half-yuan hourly fees. I netted 800,000 or 900,000 yuan a year.

"Shunda has several tens of thousands of on-street parking spots," he said. "If they say they only have some 1 million yuan in net profit, who can believe them?"

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