Fast-spreading subway network faces financing challenge

BEIJING - The financial costs and feasibility of China's fast-expanding subway network have come under the spotlight as more cities get the go-ahead to weave their underground network.

Statistics from the National Development and Reform Commission showed altogether 28 cities had gained approval to build or expand subways last year, with 2,710 kilometers of new lines planned for the coming six to eight years.

Investments on those projects amounted to 910 billion yuan ($144.4 billion), according to the economic planner.

Apart from the newly approved plans, subway lines that are under construction scattered across China, including the metropolis of Beijing and Shanghai, as well as some second-tiered cities such as Changzhou and Dongguan.

China's subway construction experienced a boom following the country's massive 4-trillion-yuan stimulus program in 2009.

After taking a hit from the tightening monetary policies in 2011, activities picked up again last year when authorities introduced a string of pro-growth measures, including fast-tracking the approval of massive infrastructure projects, to pull the economy out of a slowdown.

In 2012, the cities of Suzhou, Kunming, Hangzhou and Wuhan opened their subways. The capital city of Beijing added four new lines to its operation on December 30, bringing its track length to 442 kilometers, the country's longest.

By 2020, China aims to have subways in 40 cities, with track length reaching 7,000 kilometers.

Although the spread of the subway system is expected to ease congestion on the roads amid China's urbanization ambitions, hefty investments will heap financial pressures on some cities, analysts warned.

Local governments' fiscal revenue usually accounted for around 40 percent of the total investments, and the rest mainly came from bank loans and other financing vehicles, according to information from the NDRC.

For the less affluent cities in central and west China, such as Nanchang, Kunming and Nanning, investment on a single line would cost their governments' land tax revenues for a whole year, according to Zhang Kaizhao, an analyst with the Institute of Economics of Tsinghua University.

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