Energy Security

[Firn]

Public transport is certainly a key element towards Energy security for China and to curb further rises in pollution. The Chinese push towards nuclear powerplants to cover the rising energy consumpition is another one and fits with the support for rail.

It is of course impossible for us to get a good idea about the quality of the investment and it's long term return on investment for the country. The Keynesian multiplier can be rather large and I think that the policy of urban rail is sound for the bigger denser cities with the opportunity costs looking not too bad. In smaller cities the calculation will be of course different. The financing ist obviously putting additional pressure on the state banks.

Does the fact that new Chinese metro systems require operational subsidies pose a problem? It depends on your perspective. From a fiscal point of view, long-term operational aid will impose heavy burdens on local taxpayers, just as is true in U.S. and European cities. This is especially a problem because Chinese cities have intentionally set fares at very low levels (just 2 yuan a ride in Beijing), making it impossible to cover costs. Should China, with relatively low labor costs,* be in this situation?

Another take on it from the Economist with some critical views:

Zhao Jian of Beijing Jiaotong University reckons that metros in fewer than 20 of the 38 designated cities make sense. He says that perhaps ten of those could be replaced with cheaper light rail, which runs above ground. The minimum core urban population that can qualify a city for an underground system is 3m people, but even a place that big may find the operating costs crippling. Mr Zhao says the systems in Harbin and Kunming are unnecessary.

Shi Nan of the Academy of Urban Planning and Design in Beijing says it is obvious that “we cannot count on private cars” to get around the big cities. But the metro projects mostly rely on government subsidies, and operating them will be a “bottomless pit”, says Mr Zhao. He says city officials tend to pursue grand projects that may not even make money because they will not be around to bear the burden. The performance of local officials is evaluated on how much they increase local GDP, not on whether projects they build are needed. Today’s leaders get credit for spending money. Tomorrow’s must foot the bill.

I'm well aware of the bad state incentives, the already huge investment drive and the troubles with financing, but I think it is wise to take note of some of the opinions in the comments. What I know for sure is that the Chinese urbanisation level is still very low compared to Japan in the 80ies and will very likely rise considerably. The picture on the operating costs may well look more positive in years to come and in any case it is hard to imagine an alternative for Chinas larger cities urban transport problem.

P.S: At least Line 13 in Bejing is not that empty. Longer trains should help.