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The Lowest Subway Fare in China

From News, page 5, The Economic Observer issue no. 335-336, October 1-8, 2007
Original article in Chinese:

On October 7th, as commuters eagerly gathered to ride the first train of the new number five subway line, they enjoyed another public transportation treat: subway fares slashed to two yuan and the introduction of unlimited transfers. The drop comes after eighty percent of citizen representatives ratified a proposal to implement the flat fare at a hearing on subway pricing policy on September 26th and Beijing's official approval shortly thereafter. The so-called "Beijing Model", which includes the reduction of the bus ticket prices at the end of last year, is dedicated to traffic relief. But supporting it is a massive financial expenditure from the government on the order of one billion yuan.

The Lowest Subway Fare

At the hearing on rail traffic ticket pricing on Sept. 26th morning, 25 representatives from different industries brought forward their own opinions on the two pricing systems proposed by department concerned, one being to implement a flat fare of two yuan, the other to adopt a flexible pricing scheme ranging from two yuan to four yuan according to the distance traveled. The 19 representatives approved the first proposal, and 6 approved the second.

The current average cash fare for taking the four present lines is 3.25 yuan per person per trip. If a flat fare is to be adopted, approximately 83 percent of passengers will save 1.3 yuan per per trip.

Chai Xiaozhong, deputy director of the Beijing Municipal Development and Reform Commission, says that the solution for Beijing's traffic congestion is not above ground but below, and passengers should be attracted there by lower fares.

The Beijing Model

Li Wen, a clerk at Beijing's IT district Zhongguancun, clearly recalls his excitement when finding out that it only took him 4 jiao (0.4 yuan) to take a bus at the very beginning of the year. He is just one of the millions of beneficiaries of the "Beijing Model".

The total number of motor vehicles in Beijing reached three million in May 2007, and this number is still expanding by 1,200 per day, says Quan Yongshen, director of the Beijing Transportation Research Center.

Traffic problems gradually emerge as motor vehicles increase and driving becomes more frequent. According to Shi Qixin, who studies transportation issues at Tsinghua University, the fundamental solution to the current traffic congestion is to develop public traffic rather than building more roads or limiting private cars.

History has proven the effectiveness of this strategy. Since the implementation of a lower bus fare at the beginning of the year, the carrying capacity of Beijing's ground public transport rose by 2 million person-trips to 11.48 million person-trips.

Shi notes that following efforts should be made to provide better service from the public transport system: they should be made more comfortable, more punctual, and more convenient. Only in this way will car owners be willing to turn to public transport means.

Departments involved describe the model in the framework of "two assertions and four priorities", that is, the model affirms public transportations strategic value in the sustainable development of the city and its relationship to the common good, and prioritizes the land acquisition, investment planning, assignment of rights of way, and financial support.

For locals, however, the bottom line is simple: things are cheaper.

As for whether the model can be copied by elsewhere in China, Professor Xu Guangjian believes it depends on governmental attitude. "Most local governments have the capability, the key is whether they are willing to bear the costs."

Low Prices not Temporary

One representative at the hearing expressed his concern about the duration of the new pricing policy. Will prices float back up after the 2008 Olympics?

According to our calculation, government subsidies for the subway system after the 6th is completed will be around one billion yuan in 2008. As more rail transport lines come into operation, more financial support from the government is correspondingly required.

Chai Xiaozhong is positive on this. "The government dares to implement such a policy because it can afford it," he says, stressing that the policy is not temporary.

But there remain concerns about the efficiency of the companies involved after they are pushed to become more public-interest oriented, and whether the government subsidy can be properly allocated..

"As long as the government exercises effective supervision, there won't be a decrease in efficiency," says Shi Qixin. He suggests that the government build in assessment mechanisms, and that subsidies should be provided only after all have been met.


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