Until now, China has approved 43 construction projects of urban railways nationwide, and the total distance of urban rail transit has reached 8,600 kilometers, said Hu Zucai, deputy director of the National Development and Reform Commission (NDRC), at a forum. It is estimated that investment in such projects will exceed 300 billion yuan annually based on the average investment of 700 million yuan in urban rail transit per kilometer, indicating huge potential in investment and financing innovation of China’s urban railway system.
During February and September, the NDRC approved the planning on urban rail transit construction in seven cities including Wuhua, Guiyang, Luoyang and Baotou with a total length of 284 kilometers, 260 kilometers, 235 kilometers and 102 kilometers respectively. It also gave approval on planning adjustment proposal of Xi’an and Qingdao cities with a total length of 243.2 kilometers and 181.7 kilometers after adjusted.
The 43 construction projects of urban railways, which are recently approved by the NDRC, are in such cities as Beijing, Shanghai, Tianjin, Chongqing, Shenzhen, Xiamen, Ningbo, Qingdao, Dalian, Suzhou, Dongguan, Foshan, Wuxi, Changzhou, Xuzhou, Nantong, Wuhu, Luoyang, Baotou, etc. This shows that the construction of urban rail transit is spreading to tier-2 and tier-3 cities.
With rapid development of urban rail transit, financial pressure in construction, operation and maintenance will increase. China should introduce international advanced experience and offer more policy support in order to vitalize urban rail transit resources. Hu gave praise to successful experience of Hong Kong, Beijing and Shanghai in investment and financing mechanism at a meeting held on Sept. 8.
Firstly, a variety of fundraising models emerged, including "rail plus property," "rail plus community" and "rail plus town" development models. This model means one entity develops both rail and property. Future revenues from property compensate for the construction costs of building rail. The income from sales of urban rail transit tickets only accounts for 14 percent of Hong Kong MTR's overall revenue, while property development and other spillover income take a large proportion in the overall revenue.
The second model is private-public-partnership (PPP) through which government directs social capital to participate in urban rail transit construction. The typical case of PPP project of domestic rail transit construction is Beijing subway line 4. According to statistics of PPP comprehensive information platform in March released by the Ministry of Finance, investment in rail transit system registered nearly 1 trillion yuan, accounting for 12 percent of total investment in platform projects. This indicates that construction of domestic rail transit will depend more on PPP during the 13th Five-year Plan period.
The third one is the diversified fundraising models including bond issuance, asset securitization, industrial funds, financial leasing and issuing bonds in overseas countries. Cities such as Hangzhou, Guiyang and Nanchang adopt this model.
Based on a research report of Hua Chuang Securities, China will build another urban rail transit market in next 3 to 4 years with the same size with that of 50 years ago. Urban rail transit is expected to see investment amount over 2 trillion yuan during the 13th Five-year Plan period. Industrial chain will gain benefits during the construction and operation of urban rail transit. Infrastructure construction like subgrade construction, bridge engineering and rail engineering will be carried out in the first 1 or 2 years, followed by electrification engineering project, informatization engineering and other supporting facilities. Investment in vehicle purchase link takes up about 12-15 percent of total investment in rail transit construction. It is predicted that about 40,000 units of new urban rail transit vehicles are needed by 2020, with corresponding vehicle purchase amount to be around 240-300 billion yuan. In terms of the last links of operation and maintenance of urban rail transit, enterprises related to operation of urban rail transit, components of consumables and vulnerable facilities will benefit from it. Market size of heavy-duty escalator is about 18.666 billion yuan, incremental market demand for vehicle component registers around 73 billion yuan, and demand of aftermarket is worth about 65 billion yuan.
Translated by Vanessa Chen
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