NDRC mulls tougher subway rules
Steps needed to control debt risk: Premier Li
China’s top economic planner is considering raising the application requirements for subway projects, with the fiscal revenue and local GDP criteria expected to rise to three times the current threshold.
The National Development and Reform Commission (NDRC) recently released draft regulations for strengthening the management of rail transit planning, domestic news site thepaper. cn reported on Monday.
According to the draft, only cities with fiscal revenue of over 30 billion yuan ($4.73 billion), local GDP of over 300 billion yuan and a permanent resident population of over 3 million should be allowed to apply to build a new subway system. The draft criteria for applications for light rail projects are half as high as these figures.
The NDRC didn’t comment on Tuesday.
In light of the new rules, more than 10 cities – including Hohhot in North China’s Inner Mongolia Autonomous Region, Kunming, capital of Southwest China’s Yunnan Province, and Shenyang, capital of Northeast China’s Liaoning Province – will no longer meet the requirements, thepaper.cn noted.
Early in August 2017, a rail transit project involving investment of 30 billion yuan in Baotou in Inner Mongolia came to a halt, Caixin reported in November. Meanwhile, two subway lines and an expressway connecting Hohhot and Erdos have also been suspended, it said.
An official at the Hohhot publicity department, who wished to remain anonymous, told the Global Times on Tuesday that the city had received the NDRC announcement, but he declined to comment.
Rein in debt
The new policy may be aimed at containing financial risks, as local governments’ enthusiasm for carrying out infrastructure projects has resulted in rising debts in various areas, Ye Tanglin, a professor with the Capital University of Economics and Business, told the Global Times.
“Purely in order to improve the image of their cities, many local governments rushed to launch large-scale subway projects. But the usage of the subways was so low that the governments had to provide subsidies for running them. This sowed the seeds of a hike in local government debts,” he said.
By the end of December 2017, the total amount of local governments’ outstanding debt had reached 16.47 trillion yuan, which is still within the official limit, data from the Ministry of Finance showed on January 17.
During this year’s two sessions of the National People’s Congress (NPC) and the National Committee of the Chinese People’s Political Consultative Conference, which are being held in Beijing, Premier Li Keqiang stressed the need to defuse risks from the rise in local government debt.
“All forms of borrowing and debt underwriting that violate the law and regulations are strictly prohibited. Provincial-level governments should assume overall responsibility for debts incurred by local governments within their jurisdiction; governments below the provincial level should live up to their own responsibilities; and all must take active, prudent steps to deal with outstanding debt,” he said on Monday.
Ma Hong, an analyst specializing in infrastructure at China Capital Investment Group, said that China’s total infrastructure investment – including public-private partnership projects – will be controlled within a certain level and will not grow too fast.
Due to fiscal pressure, infrastructure projects that have low yields and don’t conform to the new rules may be abandoned this year, he said.
“Dragged down by lower infrastructure investment, these cities’ overall investment growth will be slower than expected,” he told the Global Times.
Cities that can’t afford the construction of subways can only choose transport options with smaller capacity, and light rail might be a good choice, Wang Chuanfu, chairman of leading Chinese new-energy carmaker BYD, told the Global Times.
The cost of light rail is 100 to 200 million yuan per kilometer, far less compared with subways whose price is about 600 million to 1 billion yuan per kilometer.
China has more than 250 prefecture-level cities and a 10-trillion-yuan market for medium and small-scale transport systems, Wang said, noting that the company is in talks with 20 cities in China about light rail projects.
“All forms of borrowing and debt underwriting that violate the law and regulations are strictly prohibited. Provinciallevel governments should assume overall responsibility for debts incurred by local governments within their jurisdiction.” Premier Li Keqiang