Caixin
Oct 09, 2012 05:25 PM

For Subway Projects, a Costly Ticket to Ride

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(Beijing) – More urban transit projects have been added to China's economic development agenda as a deus ex machina solution in the face of slowing GDP growth.

Two years ago, local governments won permission for 22 rapid transit projects from the central government's National Development and Reform Commission (NDRC). The combined 882 billion yuan investment was touted as a shot in the arm for the nation's economy.

NDRC repeated the performance in September by approving 25 rapid rail projects, including plans for 22 urban surface and underground railway lines, with a proposed total investment of 838.9 billion yuan. Targeted cities include Shanghai, Guangzhou, Xiamen, Taiyuan and Lanzhou.

The latest projects are in addition to 11 subway-building programs approved in April and another 16 in June. These included a Guangzhou subway project worth more than 133 billion yuan and a nearly 159 billion yuan underground rail project in Shanghai.

A cooling real estate market and slumping overseas demand for Chinese goods have been cited among the factors contributing to slower GDP expansion since last year. But Beijing has not abandoned hopes for 8 percent growth in 2012 – a target NDRC and local government officials hope to support in a big way through urban transit investment.

"Infrastructure investment is part of what's driving the economy so China can secure 8 percent GDP growth by the end of this year," said an NDRC official.

The projects are also slated to vastly improve public transportation in urban areas. Guangzhou, for example, plans to expand its subway to support up to 38 percent of all of the city's public transport capacity by 2018, according to the local government. And in the city of Shenyang, rapid rail travel is expected to account for 30 percent of all public transportation use by 2020.

Local governments have been enthusiastic about alleviating traffic congestion by putting more commuters on trains. They also see urban rail investment as a way to increase the value of local land, which governments own and lease as a fiscal revenue tool.

Big Hurdles

But subway tunnels and rail equipment are expensive, and in many cases local government officials have had to temper their enthusiasm for high-profile transportation projects in the face of financial challenges.

Indeed, a subway equipment supplier says a lack of funding has forced construction delays for a significant number of the 2010-approved subway projects. Some projects are still on the drawing board, while others have been shelved.

As of last year, according to a report by The Transportation Technology Development and Planning Research Center, a division of the NDRC, some 2,155 kilometers of urban rail lines were being built in 28 cities across the country, representing a combined investment worth nearly 247 billion yuan.

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