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Status and Countermeasures of China Urban Rail Transit

The urbanization level in China is presently around thirty-six (36) percent.  Experience elsewhere, indicates that as the urbanization level reaches thirty (30) percent, the country enters a stage of accelerating development.  Fueled by the flow of international capital investment, the process of industrialization and urbanization leads to major changes in city size and city space structure. 

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For example, an increase of only ten (10) percent in the urbanization rate (to 46%) over a period of time would reflect a shift of some 130 million persons from rural areas to existing or new urban areas. That is the equivalent developing thirteen (13) new cities, each one with a population of 10 million persons.  The provision of housing, infrastructure, services and many other facets of normal day life, are an awesome challenge when viewed in the context of such numbers.

The construction procedure of city metro in China is approximately divided into three stages:First, preparation stage -- includes plan of feasibility study and financing scheme, which are planning acts of government; Second,construction stage -- business activity of construction management under supervision of government; Third,taking over and operation stage -- service business activity of operation management under social control. According to character and feature of each stage, planning management and construction management are the once management of construction project, as operation management, the continuing management after taking over.

Comparing in other countries, metro construction is still in its infancy in China. It is inevitable to develop metro in China. Therefore, it is necessary to discuss construction management program from different classes.

1. Development Milestones of Chinese Urban Rail Transit

Chinese rail transit has a history of more than 40 years of development. Over those years, urban rail transit has mainly experienced the following stages of development.

1.1 Initial Steps: China’s preparations for subway projects started in the 1950s. People then began to work on the planning of the Beijing subway network.

Phase I of the Beijing Subway project (a total length of 54km)  commenced in 1965 and completed in the 1970s. The project was constructed with the guiding philosophy of people’s air defense. Following the Beijing Subway, the Tianjin Subway (the old line was 7.1km, although it has been demolished and a new line is under construction) and the Harbin air defense subway were subsequently built.

1.2 Initial Construction Phase: Until the late 1980s and beginning of the 1990s, the transportation problems in especially large cities like Beijing, Shanghai and Guangzhou become prominent due to size limitations and relatively poor road infrastructures.

This period marked the real beginning of transportation-oriented subway construction in China. It saw the construction of the Shanghai No.1 Subway (21km), the Beijing No. 8 Subway (13.6km), the modification of Phase I of the Beijing subway, and the Guangzhou No.1 Subway (18.5km).

1.3 Start of the Peak: Moving into the 1990s, following the construction of subways in Shanghai and Guangzhou, other cities like Shenyang, Tianjin, Chongqing, Wuhan, Shenzhen, Chengdu and Qingdao began their preliminary preparations for the construction of rail transit projects. 

1.4 Adjustment Stage: Because of the relatively large number of applications to construct subway projects, and the relatively high cost of these projects, the state temporarily suspended approving subway projects, and required better development planning and the localization of production.

The State Planning Commission of PRC began research into formulating relevant policies on the localization of rail equipment production. At the end of 1997, it was determined to achieve the localization of production for the Shenzhen No. 1 subway (19.5km), Shanghai Mingzhu subway (24.5km) and the Guangzhou No. 2 subway (23km). In 1998, the above-mentioned subway projects were approved by the relevant authorities. That marked the renewal of rail transit projects in China.

1.5 Peak Time of Construction: With the implementation of the financial policy in further expanding domestic needs, the government gradually approved some urban rail transit projects in 1999. After that year, the government approved subway projects for 10 cities, including Shenzhen, Shanghai, Guangzhou, Chongqing and Wuhan. The total investment for these projects was RMB 4 billion. Including Beijing, Shanghai and Guangzhou, there are now 10 cities where rail transit projects are available or under construction. Meanwhile there are another 8 cities applying for rail transit projects. Compared with the pace of the last 30 years, the development of urban rail transit is much faster at present.

 

2. Main Characteristics of Chinese Urban Rail Transit Development at Present

2.1        Smooth Construction, Continuous Improvement of Construction Quality and Better Control of Construction Cost

Since 1998, 21 rail transit projects have commenced with total mileage of about 500 km and total investment of RMB 170 billion. Currently, 13 lines, with a total mileage of 300 km and real investment of RMB 77 billion, are completed and in operation. There is a total mileage of 420 km of rail transit projects in operation, including Beijing, Shanghai and Guangzhou (excluding Hong Kong and Taiwan).

Construction costs are better controlled since construction techniques have improved, and bidding procedures are employed during the execution of the projects in fierce market competition. Currently, the average cost per kilometer is RMB 400 ~ 500 million for underground subways and RMB 150 ~ 250 million for elevated lines.

2.2 Advanced Technologies and Diverse Modes and Systems in Use

Judging from the projects completed or planned, it can be seen that China has formed diverse rail systems to satisfy urban transit demands on the basis of the development trends in rail transit technologies and different rail transit capacity requirements. Furthermore, modern control, communication and network technologies have been introduced to ensure a more flexible, safer and better transit service.

In China, there are various types of rail transit systems, including subways, urban elevated track systems, straddle-type monorail systems, medium- and low-capacity light rail transit systems, linear motor systems, high-speed maglev systems, rapid suburban railway systems, and more.

Currently, there are subways in operation or under construction in six cities (Beijing, Shanghai, Guangzhou, Tianjin, Shenzhen and Nanjing), elevated track systems available in four cities (Beijing, Shanghai, Wuhan and Chongqing), suburban railways available in Tianjing and Dalian, light rails in Changchun, a high-speed maglev system in Shanghai, and linear motor systems under planning for Beijing and Guangzhou.

2.3  Remarkable Achievement in the Localization Policy of Production

In 1999, the State Council of the PRC released the Implementation Comments on Localization of Urban Rail Transit Equipment prepared by the State Planning Committee, stating that the localization rate of all urban rail transit vehicle and motor equipment production shall be at least 70%. After the issuance of the localization policy, the production capacity for urban rail transit vehicles and others improved remarkably, and the requirement of 70% was generally met.

The government has invested about RMB 500 million worth of national debt into more than 20 projects supporting the production of rail transit equipment and parts. Some enterprises producing vehicles have been designated by the government as special manufacturers for the rail transit sector, and signal systems integration enterprises have taken part in rail transit market competitions. Gradually, a production system of rail transit industry is forming.

Under the localization policy, some foreign enterprises are entering the Chinese rail transit sector through joint ventures. As a result, the price of domestic equipment is sharply falling compared with imports.

Based on our evaluation of the Guangzhou No. 1 and No. 2 subways, the price for motor equipment for the No. 2 subway was reduced to RMB 130.7 million per km from the RMB 255 million for the No. 1 subway. The achievements of the localization policy are really remarkable and will influence the development of the Chinese rail transit industry.

2.4  Studies in Diverse Financing Methods, Breakthroughs in the Capital Bottleneck

Currently, it is the government that finances and invests in rail transit construction, in which city governments play a leading role.. Domestic banks are receptive to providing loans for rail transit projects due to the good credit of the city governments. Domestic banks actively provide funds in supporting the projects construction. Bank loans account for about 60% of total investment.

For example, the China Development Bank has committed loans worth RMB 36 billion for rail transit construction since 1997, among which RMB 29.4 billion has already been carried out. Other commercial banks also have made significant investments in rail transit construction.

Banks mainly concentrate their energies investigating government financial growth and land revenue, and the risks undertaken by banks that invest in rail transit projects are actually much less than those investing in other industrial projects, especially in cities like Shanghai, Guangzhou, Shenzhen and Hangzhou which have good government finances. So banks are quite positive regarding providing loans for these projects. Another reason for banks to be so positive is that the construction capital ratio for these projects is quite high. Many banks try their best to provide loans for those subways.

Great support from governments as well as banks has contributed enormously to the rapid development of rail transit projects. Additionally, new financing methods like BOT, PPP are studied and discussed to expand financing channels. Rail transit construction systems and operating systems in Beijing, Shanghai, Shenzhen and elsewhere are studied for reform purposes.

2.5 The Gradual Execution of GB Document No. 81

In order to enhance the management of rail transportation, The General Office of the State Council issued its Announcement on Enhancing Urban Rail Transit Management (hereafter Document No. 81) in 2003 based on the problems exposed in the construction. The document states that rail transportation shall follow the principle of “acting according to one’s capability, standardized management and steady development”.

The Document defines the qualifications for applying for rail transit. The cities which apply to construct subways shall have a budgeted financial income of above RMB 10 billion, a total GDP of greater than RMB 100 billion, a population more than 3 million, and more than 30 thousand passengers per peak-hour in one-way direction of the subway.

It also standardizes the application, review and approval procedures, requires that the rail transit constructions shall be prepared based on the overall city plan and the city transportation development plan. Review and approval of the project shall be based on the approved construction plan, and the project capital shall reach at least 40% of the total investment.

The document also defines specific requirements for construction standards, safety management, operating systems and localization of production.

Following the instructions contained in this document, Beijing, Shanghai, Shenzhen and other cities prepared and applied for rail transit construction starting at the end of 2003. Up to date, 15 cities have submitted construction-planning reports, among which those for Shenzhen, Hangzhou, Harbin, Guangzhou, Shanghai and Chengdu have already been approved by the Central Government.

It is reported in statistics that 65 lines of about 1700 km in length, with a total investment of about RMB 600 billion are under planning in 15 cities. According to the requirements of the Document, related standards and specifications for rail transit are under preparation and modification. Standards for Metro Design, Construction Standards for Urban Rapid Rail Transit Projects have already been implemented.

2.6 High Importance Attached To Rail Transit Safety

The Central Government has made important instructions on the safety of rail transit projects, and both the central and local governments have issued documents on rail transit construction and operating safety, as well as on emergency actions. Great importance has been attached to safety in the construction and operation of rail transit.

Nine ministries and commissions, including the Ministry of Construction, jointly issued a Proposal for the Further Improvement of Subway Safety. The Ministry of Construction issued a document on the Management of Urban Rail Transit Operations.

According to these documents, the management of the safety of rail transit shall be improved, rail transit safety evaluation systems shall be established, and the safety responsibility system shall be implemented.

Compulsory state standards shall be followed in the planning, design and construction stages, ensuring that all safety installations are planned, designed and constructed simultaneously in each stage. In the preliminary investigation stage, safety concerns, geological conditions and geological hazards shall be assessed together to prevent any potential geological hazards. Emergency mechanisms shall be established to deal with emergencies to increase hazard-preventing and emergency rescue capabilities.

Related safety regulations have been issued in Beijing, Shanghai and Chongqing to improve the safe control of rail transit.

 

3 Proposals on Measures for Urban Rail Transit Development

3.1 Determining Construction Plan on Scientific Development Concept

Up to the present, Chinese urban rail transit has experienced 40 years of development starting from scratch to relatively fast development and also some drastic fluctuations. But, rail transit in China is still in a preliminary stage. We have obtained many successful experiences on the technological front, in project construction, and on raising the levels of operation and management.

However, we still have problems described in Document No. 81: some local governments make requests to construct urban rail transit projects regardless of their financial strength; some urban rail transit projects are initiated blindly without prior review and approval from the Central Government; some areas simply desire transit systems because other areas have them, leading to higher construction standards and wasted investment; some also carry out projects with inadequate capital, resulting in heavy debt and severe losses after operation. 

Therefore, rail transit construction plans shall be determined relying on a scientific development concept in order to ensure the sound, orderly and sustained development of urban rail transit. Construction plans shall be made according to real situations and the conditions of economic development as well as traffic requirements, and attention shall focus on the analyses of economic bearing capacity. Apart from that, construction plans shall comply with such requirements as reasonable control of construction scale and development speed, compatibility with the level of urban economic development and the avoidance of blind development and excessive advancement.

When setting plans, the following work shall be performed to ensure the sustainable development of urban rail transit: the relationship between economic returns and social returns should be scrutinized; an effective mechanism for the successful development of urban rail transit should be found; the role of urban rail transit in parallel with development of urban and rural areas and solving urban traffic problems should be studied so as to promote balanced urban development; the impact of urban rail transit on urban environment and urban reconstruction should be studied so as to protect the urban natural and cultural environment. 

3.2 Setting Strategic Development Objectives for Urban Rail Transit

Based on the planned construction statistics from 15 cities, these cities plan to build 65 lines of rail with a mileage of 1700 km and total investment of about RMB 600 billion in the near future. If the above lines are completed in the coming 10 to 15 years, Chinese rail transit will be spectacular and world famous. Therefore, it is necessary and urgent to study urban rail transit development from perspective of the national economic development strategy.

First, the development of urban rail transit is closely related to the development strategy of Chinese urban transit and will have a great impact on the development orientation of our urban transportation. A huge investment in rail transit projects will generate enormous demand, and play an active role in promoting internal urban demand. Project construction will drive up the price of land and real estate along the line, and thus promote urban economic development and accelerate urban construction and restructuring. There will be obvious national economic and social returns. This huge impetus is an important reason for the rapid development of urban rail transit.

Secondly, various technological system modes form in concert with urban rail transit development, which plays a significant role in adjusting the structure of the materials and equipment industry and technological upgrading. As a result, studying and quick studying and working out the development strategy for Chinese urban rail transit is an urgent task.

3.3 Strengthening Theoretical Study and Basic Construction

The problems described below are emerging along with the rapid development of Chinese urban transit systems: man power in design and construction are not enough; the production supply is lagging behind; studies of basic theories and standards and specifications for construction are not good enough. Therefore, we should create favorable conditions for the construction and development of rail transit through: strengthening theoretical study and basic research work; building up standard specifications and safety systems for rail transit; Establishing complete production, design and scientific research capabilities and systems in parallel with urban transit development.

As a significant public welfare infrastructure in urban development, a rail transit project covers a vast area and is complex. It influences the development of a city deeply and is a fundamental task crucial for generations to come. Haste makes waste. Therefore, preliminary preparations shall be strengthened and solidified. In particular, analyses based on overall urban development and transportation plans are needed to fully clarify the reasonability of and realize the huge economic returns of the project.

3.4 Seeking and Exploring Multi-channel Financing

Rail transit projects are characterized by huge investment, a long construction period, slow returns and low profits. A scarcity of capital is still a problem for the construction of urban rail transit. Capital is the fundamental factor for the construction of urban rail transit. Therefore, formulation of investment policy is essential for promoting the development of urban rail transit. From domestic and international experiences, we may focus on:

Special funds: Government may set up special funds to provide a stable capital resource for rail transit, in order to encourage urban rail transit development and carry out macro controls to certain extent.

Rules and regulations to expand properly foreign investment channels. In addition to loans from foreign governments and financial organizations, project financing, lease financing, capital financing can be used for the construction of urban rail transit in order to further expand the foreign investment channel. Although said financing means are complex and risky to some extent, financing can be achieved under the support of relative rules and regulations, e.g. franchise arrangements on urban rail transit projects. Some provisions can be incorporated in national or local laws and decrees as effective and reliable measures for attracting foreign investment.

Encouraging project-employers to have multi-channel financing: Huge fixed assets and stable income sources are the best guarantees for financing subway or light rail companies. Project employer under improved socialistic market economy should have a strong ability to collect financing capital through stocks, bonds, etc. Public investors can be attracted to participate in rail infrastructure construction, including big investors and foreign capital, as well as pooling idle capital in society.

Rights and interests along the line may also be used to raise capital. For example, taking the advantage of up-valuation of the land alongside the line, carrying out a comprehensive development and operation of the land in order to reap profits, transferring the right to the development of subway stations or municipal facilities through bidding, transferring the main works of the project, such as stations, to developers for construction, collecting domestic and overseas capital through auctioning of station and place names, and taking advantage of advertising along the line for capital. 

3.5 Further Development of Rail Transit Facilities

The localization policy for rail transit has achieved a remarkable improvement since its implementation. New projects substantially reach the 70% localization rate. Domestic enterprises have developed and produced most products for rail transit and construction costs are effectively controlled.

With the development of rail transit, various rail systems like magnetic suspension and linear motor systems will appear in China. The facilities developing rail transit will thus face a new challenge developing and applying the new technology. Therefore, we should take the followings measures to form a modern rail transit technology system with Chinese characteristics, one that is compatible with our rail transit development, and establishes local and global competitiveness: further implement the localization policy for rail transit; insist on independent technological development together with the introduction of foreign technology; speed up technology upgrading; improve the level of independent development; improve domestic product competitiveness in key technologies; specify detailed measures; standardize markets to ensure effective competition; strengthen fundamental work; establish production systems, and safety authentication and quality supervision systems suitable for rail transit development.

3.6 Continuously Strengthen Macro Control

We still face lots of work and many problems, and we shall use all our efforts in this sector to achieve the development strategy of rail transit. For example, we shall prudently formulate the development plan and policy for urban rail transit, stipulate standards and specifications, promote fundamental work, coordinate markets, improve the technical level of materials and equipment, and more. These problems need to be solved urgently. Pursuant to Document No. 81, the government has offered guidance and suggestions for rail transit with respect to approval procedures, construction standards, safety assurances, management systems for construction and operation, and promotion of the localization policy.

At present, the review and approval procedure is appropriately strict and more standard, and project construction is carried out in accordance with the requirements of construction plan. These provisions and regulations render a substantial benefit to the preliminary urban rail transit construction work. Pursuant to decisions on the reform of the national investment system, the government will further broaden project-financing channels and strengthen self-determination rights for enterprises, based on the principle that “those who launch investment and make decisions assume the risks and reap the benefits accordingly.”

Along with the transformation of the government’s function, the government may take rail transit as a public infrastructure project, and offer support and preferential policies in the aspect of public finance. As for macro guidance and coordination, based on the development of rail transit and the reality of urban economic and social development, the government shall strengthen controls on project size, construction progress, investment, financing, loan repayment and capital balance; and establish economic and safety warning mechanisms. It shall also formulate relative measures to ensure the proper development of Chinese urban rail transit.

MTR Corporation (Shenzhen) Limited

Deputy Chief Construction Manager

Zhang Zitai


 

 

 

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