Subway costs feared to go off the rails
"Construction will cost at least 1 trillion yuan in total," said Chen Xunru, a member of the Chinese People's Political Consultative Conference, who conducted research into subway construction and delivered a speech on his findings to the CPPCC's annual meeting in March.The latter costs are the unseen costs associated with government directed investment, be it Chinese or American. Whenever there's an investment or spending surge, there's often not enough qualified workers (and often equipment), or if there are, they are pulled off of private sector work, raising costs in the economy.
Experts are concerned that the construction could strain the resources of some city governments and plunge them heavily into debt.
They are also worried that the cities may not have taken account of the possible long-term costs of operating and maintaining the network. Moreover, there are concerns that the large-scale move toward construction has resulted in a shortage of trained professionals, which in turn could lead to reduced safety levels.
In the case of subways, a political desire for prestige projects is driving malinvestment:
However, the belief that a subway system is a symbol of a modern metropolis means smaller cities are also keen to build. "They see subways as their chance to polish their civic image and look like a modern city," he said.Even in China's densely populated cities, subways are not profitable.
Amid the raging competition between many similar-scale cities, some lost their ability to think rationally. "Some cities are mapping subway networks that will cost their entire combined income for five years," he said.
According to Chen, a large proportion of the funds come from the government - usually around 40 percent - and bank loans. "Subways can barely attract investors, because the (low) ticket prices are set by the government to benefit the public," he said.
...The fact is that it's difficult to make money from subway operations, and only Hong Kong's metro system is profitable, he added.
Ying Minghong, board airman of Shanghai Shentong Metro Group Co, said that only Line 1 is profitable. The income from ticket sales and advertising covers its daily operating costs, but is not enough to pay for maintenance or the interest on its loans. The city's other lines are in debt.And let's not forget the government subsidies for car purchases. In a drive for GDP growth, the government is counteracting it's own policies.
..."I doubt there are more than five people in our company and the local government who know how much money the Shanghai metro loses every year. The problem is that it's not a simple mathematical question of adding the government's yearly subsidy and subtracting the metro's annual operating costs," said Yang.