Wednesday, February 04, 2009

Shenzhen Mass Transit: For the People

During the Spring Festival break, I was able to spend time and talk with my extended family at the different dinners and tennis outings we had. At one of the outings, I had to chance to discuss the Shenzhen public transportation with my aunt's colleague - an official who is in charge of government municipal projects. Currently Shenzhen is going through a massive expansion of its metro system. 

When discussing the effects of the economic crisis and the current government investment in infrastructure, our family friend mentioned that currently, the Shenzhen metro system had an operating loss of 500 million (五亿) RMB in the past year. That's a lot of money. 

I was first stunned at this number and was interested in why this is the case. The Shenzhen metro system is already the most expensive in the country with a graduated ticket price based on distance. Also with increasing traffic congestion, more and more people are choosing to ride the metro everyday in their commute. Even with these factors, the operating cost of the metro is still much higher than the revenue. 

As the official explained:
The metro runs as a regular company, but with the Shenzhen government as the controling party, we set the ticket prices. Our goal is to provide affordable transportation for Shenzhen citizens.  We make sure that the bus system and the metro system are not profit driven so that we can give the citizens a great service at a reduced price. This is also why all people over the age of 65 ride free of charge as well. 

As the expanded network comes online, we believe that even more people will ride the metro based on its convenience. Shenzhen will be a much different city. We believe the 500 million loss we incur every year will be reduced but in reality, that isnt too important. Cheap, reliable service to the people are.

When comparing the Shenzhen metro system with the NYC subway, there is a huge difference in thinking. Because the NYC system is profit based, price fares are constantly rising with subsequent lower service and convenience. I remember a few years ago, the MTA wanted to increase the fare price because of a loss while trying to hide millions of dollars worth of revenue from the public. 

The government promoting public transportation in China not only helps the citizens, it helps reduce the use of private cars and improves the enviorment. Currently China is building more than 10 different subway lines across the country with more planned. This is on top of the increased investment on railroads and other mass transit systems. 


Anonymous said...

The New York MTA is profit-based? Nonsense, it gets a lot of public support every year. Which I support, and I use it everyday. What gave you the idea that the MTA was profit-based?

Apart from this inaccuracy, this is also an incredibly naive post. Most officials of subways world-wide would make a statement similar to the one you are citing, and very few subway systems are run on a for-profit basis.

Mike said...

either you are naive or ignorant.

the MTA is a private corporation. the point of corporations are to make profit. econ 101. otherwise it would be state run (ie China) or non-profit.

Caliboy said...

Actually it's not that simple. The MTA is a public-benefit corporation in the state of New York, which makes it a sort of quasi-governmental and quasi-private entity.

From the MTA Website:

"A public-benefit corporation chartered by the New York State Legislature in 1965, the MTA is governed by a 17-member Board. Members are nominated by the Governor, with four recommended by New York City's mayor and one each by the county executives of Nassau, Suffolk, Westchester, Dutchess, Orange, Rockland, and Putnam counties. (Members representing the latter four cast one collective vote.) The board also has six rotating non-voting seats, three held by representatives of the Permanent Citizens Advisory Committee (PCAC), which serves as a voice for users of MTA transit and commuter facilities, and three held by representatives of organized labor. All Board members are confirmed by the New York State Senate."

Wikipedia has a good description about NY State's public-benefit corporations:

The MTA is run like a governmental agency but because of its corporate status, it is not subject to certain regulations and oversight requirements, and has more flexibility with its finances, including the ability to take out its own debt.

So in many ways, its closer to a Chinese SOE than a true private corp.