China News Weekly reporter Li Mingzi
Published in the 2023th issue of China News Weekly magazine on December 12, 4
This year, some urban subways have blown the wind of "opening up sources and reducing expenditures".
Since September, Guangzhou and Foshan have officially bid farewell to the "9% discount after 15 times" subway fare. The new plan implements the "full discount", ordinary passengers can enjoy a 6% discount if the cumulative actual expenditure of Guangzhou Metro bus is less than 80 yuan and less than 200 yuan within a natural month, and the part exceeding 8 yuan will enjoy a 200% discount.
Based on the calculation that office workers work 22 days a month and take 44 round-trip subway rides, when the one-way fare exceeds 9 yuan, passengers can enjoy greater discounts in the new plan. For most ordinary workers, the subway has "secretly" increased in price.
Hangzhou and Beijing have made efforts to save energy. Since April this year, Hangzhou Metro has announced that the escalators at some stations will only be opened in the morning and afternoon on weekdays. Some netizens ridiculed, "Hangzhou Metro elevator took the lead in realizing the 4-hour work system, and it also has two days off." In order to save energy and reduce emissions, the public areas of 8 stations in the first phase of Beijing Metro Line 6 have been replaced with lighting fixtures. It is estimated that this renovation alone can save 20.520 million kilowatt-hours of electricity and reduce carbon dioxide emissions by 3141,<> tons per year.
The frequent actions of subways in major cities this year are closely related to "reducing costs and increasing efficiency", and the vast majority of urban subways lost a lot of money last year. By the end of 2022, a total of 41 cities in China had opened subways. According to inquiries from platforms such as Shanghai Clearing House and China Bond Information Network, metro companies in at least 32 cities have announced their 2022 results, and only 5 cities are still profitable after deducting government subsidies.
Since the beginning of this year, subway projects in many places have been suspended, once again arousing people's attention to subway construction and operating costs. However, looking at the world, 90% of subway lines are losing money, and the evaluation of the operation effect of urban subways is far more than whether it can be profitable.
The subway is so crowded, why do you still lose money?
If the most "crowded" subway is selected, Beijing Metro Line 6, Shanghai Metro Line 9, Guangzhou Metro Line 3 and Shenzhen Metro Line 5 may be difficult to distinguish.
According to the statistics of the China Urban Rail Transit Association, Beijing Metro Line 2019, Shanghai Metro Line 6, Shanghai Metro Line 11, Beijing Metro Line 9 and Shanghai Metro Line 4 are the top five in 1. Among them, Beijing Metro Line 6 can be called the most "crowded", with the highest peak hour cross-sectional passenger flow, reaching 6,32 person-times.
When passengers are pushed into the carriage by a huge flow of people and forced to face to face with strangers, it is hard to imagine that many crowded subways are actually losing money.
Looking at the performance of subway companies in major cities across the country, only from the single indicator of net profit attributable to the parent company, except for Lanzhou and Shenyang, the rest of the cities achieved profitability last year after vigorously subsidy. However, according to the statistics of Times Weekly and other media, if the "other income" of "government subsidies related to daily activities" in the financial report is deducted, Guangzhou Metro "loses" 4 million yuan, and Hangzhou Metro "loses" 56.87 billion yuan.
The Beijing subway, which ranks first in net profit attributable to the parent company, has the largest "gap". According to the official website and financial report of Beijing Infrastructure Investment Corporation (hereinafter referred to as BII), which controls two subway operating companies in Beijing, the company's net profit attributable to the parent company reached 2022.21 billion yuan in 82, making it the only urban subway operator in 32 cities with a profit of more than 20 billion yuan. However, the "other income" of the Beijing subway, that is, the government subsidy, reached 262.86 billion yuan, and after the two phases were subtracted, the net profit of the Beijing subway after deducting the subsidy was -241.04 billion yuan, becoming the only urban subway with a loss of more than 2021 billion yuan. In 214, the Beijing subway operated by BII received a subsidy of 66.190 billion yuan, deducting a subsidy loss of 12.<> billion yuan.
As of the end of 2022, there are 25 lines operated by three companies, namely Beijing Metro Operation Co., Ltd., Beijing Rail Transit Operation Management Co., Ltd., and Beijing Hong Kong Metro Co., Ltd. The first two are controlled by the Beijing Infrastructure Investment Corporation (BIIC), which is a joint venture between MTR and Beijing Capital Group.
Such a large loss is associated with the high operating costs of the subway. Taking Beijing Metro Operation Co., Ltd. as an example, the main business cost in 2022 will be 115.55 billion yuan, and the largest expenditure will be labor costs (wages and related expenses), which will cost 60.67 billion yuan, accounting for more than half. The second is business costs, of which the direct repair cost is higher, reaching 19.62 billion yuan, and the direct power and security inspection costs are more than 13.10 billion yuan, and the security inspection expenditure directly accounts for more than <>% of the main business cost.
"Labor costs account for the highest proportion of the daily operating costs of the subway, followed by energy costs, and production, maintenance and other costs account for a relatively low proportion." Ji Huan, a staff member of Hangzhou Metro Group, pointed out in the "Analysis and Enlightenment of Subway Operating Cost Control" that labor costs are greatly affected by the operation of the subway, taking the departure interval as an example, shortening the departure interval can improve the travel efficiency of passengers, but it also needs to be equipped with more crew and production and maintenance staff, which improves the staffing level per kilometer to a certain extent, and then affects the labor cost and total operating cost of the line.
The construction of urban rail transit itself has the law of high investment in the early stage and long return period, and the cost of one kilometer subway is hundreds of millions of yuan. According to the "Report on Urban Rail Transit Development Strategy and the Development Ideas of the 2019th Five-Year Plan" issued by the Urban Rail Association, the median operating cost of rail transit enterprises (excluding overhaul and renewal) in 1126 was 15.1500 million yuan/km, and the operating cost of rail transit enterprises in Beijing, Shanghai, Guangzhou and Shenzhen that entered the overhaul and renewal period exceeded <> million yuan/km.
Not only Beijing, but also Shenzhen, Wuhan, Jinan and other cities have also seen their operating costs rise. Taking Zhengzhou as an example, its total subway operating income in 2022 will be 6 million yuan, and the total operating cost will be 81.38 billion yuan, a difference of more than 70 billion yuan. The total cost of revenue in 20 in 2022 cities, including Changzhou, Jinan, Hangzhou, Chongqing, and Ningbo, increased by more than 2021% compared with 10. It is worth noting that the cost increase of Changzhou and Jinan metro companies has exceeded 200%, and the cost increase of Hangzhou and Chongqing metro companies has exceeded 100%.
Li Hongchang, deputy dean of the National Institute of Transportation Development of Beijing Jiaotong University, told China News Weekly that the general rise in subway operating costs last year was related to epidemic prevention and control. Most urban subways have not been suspended, and a large amount of rigid expenditures such as epidemic prevention equipment and personnel have been invested. In addition, the energy savings from the reduction of subway frequency are limited, and maintenance costs will not be reduced as a result of maintenance work as usual. The sharp rise in subway operating costs in some cities is mainly due to the expansion of the subway network, the increase in mileage, and the corresponding increase in operating investment.
According to the "2022 Annual Statistics and Analysis Report on Urban Rail Transit" released by the China Urban Rail Transit Association, a total of 1080,63.20 kilometers of new urban rail transit lines were added last year, and 174 cities such as Beijing and Tianjin have new lines or new sections in operation. Among them, Hangzhou added 136 kilometers, ranking first in the country. In addition, Shenzhen has added 11.50 kilometers of new mileage, and Chongqing, Fuzhou and other cities have also increased by more than <> kilometers.
The single source of income is another important factor in the loss of subways in many cities. Due to various reasons, the Beijing subway is rarely equipped with underground commerce, and the proportion of commercial stations on the subway is also very low, and it is often necessary to walk for more than ten minutes to reach the business district after leaving the station. Subway fares are one of the main sources of revenue, but they are often a drop in the bucket compared to huge costs.
In 2022, the ticket revenue of BII's two metro companies reached 46.24 billion yuan, divided by about 10 billion passengers, which is equivalent to an average fare of 4.6 yuan per passenger. However, the per capita operating costs of the two companies are several times higher, at 12.54 yuan (subway operating company) and 33.20 yuan (rail transit operation and management company), respectively, which means that the government has to subsidize about 8 yuan or 29.6 yuan respectively for each ride on the subway line operated by the two companies.
The starting fare of the Beijing subway has been adjusted several times, rising to 2000 yuan in 3, but falling to 2007 yuan in 2. In 2014, the Beijing subway fare was raised to 3 yuan again, and at the same time, a dynamic price adjustment mechanism of "one small adjustment per year and one major adjustment every five years" was established, making it clear that the increase rate was not higher than the increase in Beijing's per capita disposable income. According to this calculation, in 2024, Beijing subway fares will enter a cycle of "five years and one major adjustment", but Beijing has not yet announced the relevant plan.
"Rail transit is an urban infrastructure, its own public welfare determines its low fares, public affordability is the bottom line of prices, it is impossible to completely price in accordance with the market method, and the construction of subways is not to pursue high profits and high returns." Li Hongchang analyzed.
According to the data, in 2022, the Beijing Metro Operating Company is responsible for the operation of 17 lines, and the per capita operating cost of passengers is 12.54 yuan. BJMTR operates 5 lines, with an average operating cost of RMB20.64 per passenger. The Beijing Railway Company operates 3 lines, and the per capita operating cost of passengers is the highest, reaching 33.20 yuan. According to the data of the three companies, the per capita operating cost of passengers in the Beijing subway network is 14.32 yuan, which is more than three times the average fare.
In terms of passenger flow data, according to the annual flash report on urban rail transit operation data released by the Ministry of Transport, in 2022, the total passenger volume of Beijing's rail transit (including subway) will be 22.62 billion, a decrease of 2021.30% from 66.22 billion in 62. With insufficient passenger flow intensity and a lack of diversified business support, most urban metro companies have only one way out, relying on government subsidies.
"In the world, only a very few cities such as Hong Kong can rely on fares to make a profit from their main business." Li Hongchang analyzes that without considering fixed costs such as depreciation, the average fare income can basically cover 65% of the variable cost, that is to say, the number of passengers does not change the loss essence of "fare income cannot cover the cost", "the city subway group makes money, not by the main business, but by the sideline."
If the fare does not rise, what will the subway rely on to make a profit?
In 2019, Shenzhen subway fares were also caught in a storm of price increases. Although it was decided not to adjust it for the time being, daily commuters soon found that many stations of the Shenzhen Metro were advertised for the sale of real estate developed by themselves.
According to the 2022 annual report of Shenzhen Metro Group, the company achieved an operating income of 239.76 billion yuan, a year-on-year increase of 46%, a total profit of 23.29 billion yuan and a net profit of 8 million yuan under full cost accounting. The secret of its profitability is the skillful use of the TOD model of "rail + property".
This model was first proposed by the American architect Peter Carlthorpe, who believed that high-density urban growth should be planned and developed in a transit-oriented manner. In other words, with urban rail transit as the core, the high-density development of the area with a radius of 1000,<> meters from the core will be developed and built into a multi-functional community, so that it can meet the needs of residents for living, working, leisure and entertainment.
MTR is one of the few profitable urban metro companies in the world and the "spokesperson" of the TOD model. In the past 40 years, except for a loss of HK$2020.48 billion due to the impact of customs lockdown in 2022, MTR has been profitable every year. Its 478 financial report shows that the company's revenue is HK $12.98 billion, and the net profit attributable to the parent company reaches HK $27.2 billion, a year-on-year increase of 9.104%. Among them, the profit after tax of the property development business reached HK$8.<> billion.
The biggest contributor to MTR's profitability is not its daily passenger transportation, but its property leasing and management business. After the completion of the station, the surrounding land price appreciation, the key to the "rail + property" model is to use this economic benefit. The MTR can manage properties and obtain rental income (property leasing business), and can also sell properties for profit (property development business), so it is often said that "MTR is actually a real estate development company engaged in subway business".
Shenzhen, which is adjacent to Hong Kong, was also the first mainland city to introduce the TOD model. Shenzhen Metro Real Estate Group Co., Ltd. (hereinafter referred to as Shenzhen Railway Real Estate), a subsidiary of Shenzhen Railway Group, is responsible for the station-city development business, and in 2022, Shenzhen Metro will have a revenue of 160.48 billion yuan in station-city integration, the highest amount among metro companies.
According to the annual report of Shenzhen Railway Group, in the past year, the company's "station-city integrated development" revenue increased by about 68% year-on-year, accounting for 66.9% of the company's total revenue. Since 2017, Shenzhen Railway Real Estate has ranked among the top three real estate development enterprises in Shenzhen in terms of comprehensive strength for six consecutive years, and will rank first in 2022. The company's real estate sales have exceeded <> billion yuan for eight consecutive years, and its development volume and sales performance are in the first echelon.
In contrast, Shenzhen Railway Group's subway operating revenue in 2022 will be about 37.2021 billion yuan, a decrease of nearly 2 million yuan from 15, accounting for only 4.<>% of the company's total revenue. In the current profit model of Shenzhen Metro, the subway operation business continues to lose money, and investment income and station city development income are the main means to make up for the loss of subway operation.
However, there are certain particularities in the success of Shenzhen's TOD model, with less land resources and high housing prices, but there is uncertainty about whether the follow-up investment profits can continue to maintain the current high returns and high growth. In 2022, while maintaining a substantial increase in revenue, Shenzhen Railway Group's net profit will shrink by 8% to only 66 million yuan. Combined with the soaring operating costs caused by factors such as the opening of new routes, corporate profits have been greatly diluted.
According to the performance table of 32 city subway companies counted by Times Weekly and other media, after deducting local government subsidies, there are still five cities in Wuhan, Shenzhen, Jinan, Shanghai and Changzhou that are profitable. Shenzhen ranked second, with a difference of nearly 5 billion yuan from Wuhan, the "most profitable" city.
In 2022, Wuhan Metro's net profit attributable to the parent company will be 15.7 billion yuan, other income will be 0 million yuan, and after deducting subsidies, there will still be a profit of 87.14 billion yuan, which is the only city among the 83 cities announced that the net profit in addition to subsidies exceeds 32 billion yuan.
For Wuhan Metro, the primary development income of resources and ticket income are the main business of Wuhan Metro. According to the annual report, in 2022, Wuhan Metro's ticket revenue will be 31.27 billion yuan, compared with the input cost of 54.12 billion yuan, and the net profit will be -22.85 billion yuan. However, the revenue of the primary development of Wuhan metro resources was 53.94 billion yuan, the cost was 23.26 billion yuan, and the net profit reached 30.68 billion yuan, which fed the subway business and turned losses into profits.
"The Wuhan Metro also adopts the TOD model." Li Zhigang, dean of the School of Urban Design of Wuhan University, told China News Weekly that Wuhan began to explore the model in 2014, and from a planning point of view, the difference between Wuhan Metro TOD and Shenzhen is that it combines rail transit with the construction of Wuhan metropolitan area, and uses the characteristics of rail transit express, large volume and accuracy to connect the population and resource elements of the four cities of "Wuhan, Hubei and Huanghuang", so as to improve the population scale and consumption scale, and improve the sustainability of "rail + property" revenue.
In 2022, Changzhou Metro will break out of the encirclement, deducting other income of 0 million yuan, and the net profit will be 1 million yuan. Jinan, a second-tier city, will see a 0% increase in net profit in 36, and its biggest driver is also the "TOD model". As early as when the first subway in Jinan was not opened, the senior management of Jinan Rail Transit Group told the media that Jinan's rail transit is striving for the goal of profit, and strive to build and operate the subway without owing a bunch of debts to the government. The specific approach is to "balance the investment in subway construction with the income from land resource development, and make up for the operating losses with the income from property development and equity investment". Last year, the Jinan Land Reserve Center released the "Jinan TOD Comprehensive Development Project Promotion", which will build another 2022 TOD urban complexes.
Among the cases of subway profits, Shanghai is unique in achieving profitability through diversified side businesses. Shanghai Shentong Metro Group is responsible for the investment, construction and operation of Shanghai rail transit, and is responsible for the operation and management of urban railway lines. According to its financial report, the largest contribution in 2022 is the "financial leasing and commercial factoring" business. Shanghai Shentong Metro's total operating income in 2022 will be 3 million yuan, of which the operating income of the financial leasing company will be 43 million yuan, accounting for 0% of the annual revenue. In addition, Shanghai Shentong Metro has also laid out the photovoltaic industry and charging pile industry, and its subordinate new energy company has an operating income of 76 million yuan in 22, which only accounts for 2022% of the annual revenue, but a year-on-year increase of 0%.
In addition to the conventional approach of opening up sources and reducing expenditure, Wuhan, Shenzhen and Jinan, which were profitable last year, have all increased R&D investment to improve resource efficiency. According to the annual report, in 2022, Shenzhen Metro's R&D expenses will reach 1 million yuan, a year-on-year increase of 16%. Wuhan Metro's R&D expenses were 27.910 million yuan, a year-on-year increase of 85%. The R&D expenses of Jinan rail transit were 2602.86 million yuan, an increase of <>%.
In the traditional mode, the business system of each new line is independently built with an information system, which has high construction costs, resource utilization rate of less than 50%, serious data islands, and a large number of equipment occupying the valuable underground space of the subway station. The metro company has invested in research and development to promote the construction of smart urban rail, hoping to reduce costs and increase efficiency.
"The premise of the subway company's diversified business exploration is government policy support and high-quality resource injection, which most cities in China may not have such conditions." Li Hongchang said that based on the public welfare nature of the subway, most subway companies are unable to cover the cost of ticket fees and commercial income, their self-hematopoietic ability is insufficient, and their dependence on government subsidies is still high. "However, it is the norm for the subway to lose money around the world."
Will losses slow down the repair of subways?
The enthusiasm for the construction of subways in various places has not been stopped by "losses". As the last round of construction cycle is coming to an end, a new round of subway construction declaration has begun.
In July this year, the five-phase construction plan of Shenzhen Railway, which has attracted much attention, was approved, with 7 planned lines, a total length of 11.185 kilometers and a total investment of 6.1952 billion yuan.
Not only first-tier cities, but also the construction of the third subway line in Changzhou has begun. According to incomplete statistics, more than 30 cities, including Wuhu, Lanzhou, Nantong, Taiyuan, Harbin, and Dalian, have started a new round of subway construction planning approval or preliminary research work.
There is a threshold for the construction of urban rail transit. In 2015, the National Development and Reform Commission's Basic Department said at a press conference that the city's GDP should exceed 1000 billion yuan, the fiscal revenue should exceed 100 billion yuan, the population of the main urban area should exceed 300 million, and the predicted passenger flow intensity would be more than 3,<> people per kilometer to be able to build the subway.
In 2018, the State Council's "Opinions on Further Strengthening the Management of Urban Rail Transit Planning and Construction" (hereinafter referred to as the "Opinions") was promulgated, which further raised the threshold. According to the "Opinions", if a city wants to build a subway, local GDP and fiscal revenue need to reach 3000 billion yuan and 300 billion yuan respectively, which is three times that of before.
For small and medium-sized cities, the subway can not only bring new urban population and industry, but also drive up land prices. For cities that do not have so much money in their pockets, raising the threshold is a curb on local debt ratios. According to the Opinions, the review of cities with high debt risk will inevitably become stricter.
The "Opinions" clearly stipulate that the initial passenger flow intensity of the subway route should reach at least 0,7 passengers per kilometer per day, and the long-term passenger flow scale should reach more than 3,2022 passengers per one-way peak hour. And if the requirements of the "Opinions" are strictly followed, a number of new applications from cities that have already built subway stations may also be blocked. According to statistics from the China Urban Rail Transit Association, in <>, the only cities with metro passenger flow intensity exceeding the passing line were Guangzhou, Shenzhen, Shanghai, Beijing, Nanjing, Shenyang, Chengdu, Xi'an and Changsha.
Since the beginning of this year, the subway planning projects in many cities have shrunk, and some analysts point to the loss of subways. "Losses may be one of the reasons, but they are not the only one, let alone the most important factor." According to Li Hongchang's analysis, if there is a "shrinkage of subway lines", most of them occur in the construction planning stage, rather than during the project planning period. As far as the construction plan is concerned, there are many requirements for each link of the entire application and approval process, such as the preparation of complete and detailed passenger flow forecasts, environmental assessments, social stability assessments, etc., before they can begin to be submitted for approval layer by layer.
"The construction of the subway in the city is not only the gain and loss of the main business itself, but also the economic account." For example, Li Hongchang said that the construction of the subway itself is a huge investment, which can effectively stimulate economic growth, promote the large-scale development of local industries, effectively alleviate the problem of urban ground traffic congestion, achieve energy conservation and emission reduction, and improve the city's influence and competitiveness.
The end of the subway is often the edge of the outward extension of the urban core. Xie Xiaowen, an expert member of the New Technology Promotion Branch of the China Communications and Transportation Association, once said that the subway, as an urban public transportation infrastructure, has an important social service function, and is even so important that it is indispensable. "Although the current loss, but in the long run, the assets generated by the construction of the subway are excellent and scarce assets, not only should not be depreciated, but also appreciated by the value of good assets. Therefore, it cannot be considered purely in terms of benefits and profitability in the narrow sense."
China News Weekly, Issue 2023, 45
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