These funky new train designs will do little to help Beijing Metro with its estimated 1 billion yuan annual loss.
The 12 cities across China that now boast of subway systems may all have massive populations, but few have actually found the holy grail turning in a profit, this despite the tonnes of subsidies they receive from local governments each year to prop up operations.
Ye Jingyu of the Economic Observer gives us a snapshot of the rather bloody situation:
According to the Shenzhen Metro Group’s 2010 annual report, the company’s operating revenue in 2010 was 860 million yuan, once we take off the 730 million yuan in operating costs and tax and various other costs, the company had an operating loss of 204 million yuan in 2010.
However, with thanks to a one off payment of 834 million yuan of “external revenue,” the company was able to report an total profit of 629 million yuan.
According to a note in the report, 831 million yuan of this non-operating income came from government subsidies.
At a press conference held to unveil the 2010 annual report, a senior representative from the Shenzhen Metro Group told the media that the subway’s losses were primarily due to ticket prices. Shenzhen’s average per capita subway fare is 2.8 yuan per trip, while the actual cost is as much as 5.9 yuan per passenger-trip.
Beijing is also reported to lose about one billion yuan each year running its system.
Only one of Shanghai’s subway lines operates at a profit.
The central government has been struggling to contain the subway-building frenzy through its National Development and Reform Commission (NDRC), which has been pulled in different directions given the economic climate. According to a China Daily report from two weeks ago:
The NDRC imposed minimum requirements to prevent financially weak cities from building subways: A city must have an urban population more than 3 million, annual GDP must exceed 100 billion yuan, the local government budget must be at least 10 billion yuan, and the one-way traffic flow must reach 38,000 at peak time.
But, caught in the grip of subway fever, some cities have acted inappropriately.
In 2008, the State Council eased its grip on subway construction in the hope that infrastructure construction would further boost the economy. Zhang Yan, secretary general of the China Association of Civil Engineers, said that some cities manipulated the figures to meet the minimum requirement and obtain the green light: “Except for those in the first-tier, most other applicant cities submitted exaggerated figures for local one-way traffic flow.”
Interestingly, as the Economic Observer notes, Hong Kong’s Mass Transit Railway (MTR) has been invited to run the subway systems in Shenzhen and Hangzhou. We’ll see how those experiments go.