Innovation needed in financing urban rail networks

China has approved 43 construction projects of urban railways nationwide in recent years, and the total distance of urban rail transit has reached 8,600 kilometers, said a senior official of National Development and Reform Commission (NDRC) on Thursday.

Fei Zhirong, head of the NDRC's department of basic industries, said on the commission's seminar of investment and financing innovation of urban rail transit that as of now the overall length of urban rail transit in use has reached 3,400 kilometers, and annual investment is about 300 billion yuan ($45 billion).

Construction of urban rail transit is mainly concentrated in big cities in China. According to NDRC, urban rail transit investment in first tier cities accounts for 19 percent of overall urban rail transit investment, and second tier cities including Chengdu, Nanjing, Chongqing, Qingdao, Hangzhou and Changsha have seen rapid growth in urban rail transit construction in 2015. The top 10 cities' urban rail transit accounts for 76 percent of the length of China's overall urban rail networks.

Rapid growth of urban rail transit construction in recent years requires a huge amount of investment every year. "Innovation in investment and financing mechanisms are imperative and an effective measure to achieve sustainable development of urban rail transit, which should be highly promoted," said Hu Zucai, deputy director of the National Development and Reform Commission.

Hu also pointed out that innovation in investment and financing mechanisms should stress win-win collaboration: construction of urban rail transit should lead to the appreciation of land value along the rail, and the spillover effect of real estate could support the operation of urban rail in turn.

Yi Min, Chief Executive Officer for MRT's Chinese mainland business, has introduced Hong Kong's successful experience in construction and operation of urban rail transition on the seminar.

According to Yi Min, the income from sales of urban rail transit tickets only accounts for 14 percent of MTR's overall revenue.

"If we take the overall life circle of urban rail transit operation into consideration, urban rail transit is an unprofitable business," said Yi.

Hence MTR has introduced "railway plus community" model in Hong Kong to make profit through the real estate of the urban rail transit system, in order to support daily operation of the rail lines. And MTR has also successfully cooperated with Beijing Capital Group Company and Beijing Infrastructure Investment Co. through private-public-partnership to build and operate Beijing subway line 4.

The government should take major responsibility in the construction of urban rail transit because it is a public service infrastructure, which requires the authorities to strengthen innovation and support it, said Hu Zucai.