How much financial pressure is there in cities, and how many regions are starting a new round of subway planning and approval for rail transit | cities | subways

The construction of rail transit has entered a new round of urban intensive application and approval cycle.

With the current rail transit construction in multiple central cities such as Chengdu, Xi'an, and Wuhan coming to an end, these cities have begun a new phase of planning and approval processes.

Multiple cities are about to submit for approval

On August 15th, the official website of Hefei Rail Transit Group Company released the second public consultation on the environmental impact assessment of the fourth phase of urban rail transit construction planning in Hefei. This construction plan plans to construct 5 projects, including 2 new construction projects and 3 extension projects, as well as supporting projects such as vehicle depots, parking lots, stations, and main substations. The total scale of the line is about 115 kilometers.

In early June this year, the "Social Stability Risk Assessment Publicity of the Fifth Phase Construction Plan of Chengdu Urban Rail Transit" was released. At the end of last year and the beginning of this year, the plan had completed two environmental impact assessments, and the official stated that efforts were being made to obtain approval before the end of the year.

The Shaanxi Provincial Development and Reform Commission recently stated that it has initiated the planning and research work for the fourth phase of the Xi'an Metro in accordance with relevant requirements. It is expected to meet the approval requirements by the end of the year, and will include the second phase of Line 3, Line 11, Line 12, and Line 16 in the construction demonstration of the fourth phase of the Xi'an Metro.

Since the beginning of this year, multiple cities have started a new round of rail transit planning approval procedures, and some cities are also preparing new rail transit plans and conducting preliminary research and argumentation. One important reason for the intensive application of rail transit in multiple cities is the intensive approval process from 2018 to 2020.

In 2017, the construction of Baotou Metro was halted, and the approval of urban rail transit planning was also suspended the following year. In July 2018, the General Office of the State Council issued the "Opinions on Further Strengthening the Planning, Construction and Management of Urban Rail Transit", which made mandatory regulations on the regional gross domestic product, finance, urban permanent population, and passenger transportation intensity for applying to build rail transit cities.

This pause has caused delays in the approval of construction plans in some cities. After November 2018, the National Development and Reform Commission intensively approved the rail transit plans of cities such as Chongqing, Changchun, Shanghai, Wuhan, Zhengzhou, Xi'an, Chengdu, Xuzhou, Hefei, Jinan, Ningbo, Foshan, Qingdao, and Wuxi, as well as the planning adjustment plans of cities such as Beijing, Jinan, and Hangzhou.

According to the Opinion, the planning period is generally 5-6 years. Therefore, the urban rail transit plans approved after the Baotou subway was suspended are about to be completed, and most of these plans will end in 2023 and 2024. Among them, Changchun Phase III, Wuhan Phase IV, Xi'an Phase III, Zhengzhou Phase III, Chengdu Phase IV, and Xuzhou Phase II will end in 2024. Since last year, Hangzhou, Shenzhen and other places have been approved.

The Opinion also stipulates that in principle, a new round of construction planning approval work can only be carried out after the last year of implementation of this round of construction planning or the completion of more than 70% of the total investment of the planned project. However, some cities that do not yet meet the conditions for approval are also focusing on the preliminary research work of the new phase of planning.

For example, the third phase construction plan of Guangzhou's urban rail transit was originally scheduled to end in 2023, but by the end of 2022, the adjustment of the third phase construction plan was approved by the National Development and Reform Commission, and the planning and construction period will also be delayed.

Recently, the Guangzhou Municipal Development and Reform Commission announced that it is urgently promoting the construction of the third phase of the approved urban rail transit construction plan in Guangzhou. According to the relevant regulations of the National Development and Reform Commission on urban rail transit planning and construction, Guangzhou currently does not meet the conditions for the approval of the fourth phase of urban rail transit construction plan. At present, the Guangzhou Development and Reform Commission has organized the Guangzhou Metro Group to launch research on the construction plan for the fourth phase of urban rail transit.

High operational and financial pressure

Due to the upgraded threshold for approval set by the Opinion, some cities have been blocked, some cities may find it difficult to continue construction after completing previous projects, and some cities may be affected by the current project construction progress, resulting in the inability to submit the new phase plan for approval as scheduled.

On August 8th, the Lanzhou Natural Resources Bureau released a public notice on its official website regarding the new round of urban rail transit network planning in Lanzhou, soliciting public opinions. According to the plan, the new round of network has added medium capacity auxiliary lines such as Line 3, Line 4, and Line 7.

According to the statistical bulletin, in 2022, the gross domestic product of Lanzhou region was 334.35 billion yuan, with a permanent population of 4.4153 million people in the city. The total annual general public budget revenue of the city was 22.1 billion yuan. The Opinion requires that the general public finance budget revenue of cities applying for the construction of subways should be over 30 billion yuan, the regional GDP should be over 300 billion yuan, and the permanent population of urban areas should be over 3 million people.

In fact, an important starting point for the issuance of the Opinion is to prevent the aggravation of local debt burden. The Opinion points out that some cities have insufficient understanding of the objective laws of urban rail transit development, inadequate grasp of actual needs and their own strength, and problems such as overly advanced planning, excessive concentration of construction scale, and inadequate implementation of funds, which have to some extent increased the local debt burden.

On August 16th, Changsha Rail Transit Group replied to netizens that the fourth phase of the construction plan for urban rail transit in Changsha was determined as the preparation unit in August 2022, and is currently advancing research and preparation work according to the overall work plan. Currently, research has been completed and written opinions have been collected on the demands of the Xiangjiang New Area and relevant district and county governments for the recent construction of lines, and research on financial capacity and scale estimation is being carried out.

Although the construction of rail transit in various regions is expanding towards networking and the number of lines is constantly increasing, the cost of rail transit construction and operation and maintenance has significantly increased, which has increased local financial pressure.

Experts introduce that the cost of a subway is 700 million to 800 million yuan per kilometer, and some even exceed 1 billion yuan. The 2022 Statistical and Analysis Report on Urban Rail Transit released by the China Urban Rail Transit Association shows that in 2022, the average operating cost per vehicle kilometer of urban rail transit in China was 23.49 yuan, a year-on-year decrease of 1.61 yuan; The average operating cost per kilometer per person is 1.49 yuan, an increase of 0.21 yuan year-on-year; Labor costs accounted for 53.45% of the total cost, an increase of 1.01 percentage points year-on-year, while electricity costs accounted for 10.59%, an increase of 0.71 percentage points year-on-year.

The Annual Report on Urban Rail Transit Resource Management compiled by the Resource Management Professional Committee of the China Urban Rail Transit Association shows that the total revenue from urban rail transit resource management in 2022 was 64.13 billion yuan, an increase of 201.4 billion yuan compared to last year, a year-on-year increase of 45.8%; In terms of incomplete statistics, the revenue reached 13.28 billion yuan, an increase of 760 million yuan compared to last year and a year-on-year increase of 6.1%.

The annual report also shows that in the 2022 revenue composition, property development revenue was 48.24 billion yuan, accounting for 75% of the total revenue, Guangtong Commercial operating revenue was 9.21 billion yuan, accounting for 14% of the total revenue, and other revenue was 6.69 billion yuan, accounting for 11% of the total revenue; In total revenue, property development revenue was 10.41 billion yuan, and Guangtong Commercial's operating revenue was 3.75 billion yuan. Property development remains a major part of rail transit resource management.

According to the annual reports released by various rail transit groups, a significant source of revenue for these companies is fiscal subsidies. If fiscal subsidies are deducted, most urban rail transit groups will incur losses. Among them, urban rail transit groups such as Hangzhou, Chongqing, Zhengzhou, Qingdao, Ningbo, Chengdu, and Nanjing all received financial subsidies exceeding 5 billion yuan in 2022.

Professor Hao Yuanxiao from Xi'an Jiaotong University told First Financial that subways are urban infrastructure and play a significant role in improving urban functions. These products themselves have the nature of public goods, so they cannot be profitable or have high returns. Due to the relatively large investment scale, it is mainly government investment.

Therefore, in order to balance financial pressure, more and more cities are adopting the TOD model, conducting industrial development while constructing subways, using the "rail+property" model to strengthen their own hematopoietic function, and increasing profits for subways through the development of residential and comprehensive commercial land. However, Hao Yuanxiao believes that this does not solve the fundamental problem.

Hao Yuanxiao believes that local governments should start from reality, act within their capabilities, and make good planning and business predictions when carrying out rail transit construction. Keep investment within the scope of financial affordability. But it is difficult to achieve this because rail transit construction is used as an investment driver or even a performance project, so it is difficult for local governments to suppress this investment impulse.