Underground plans face approval delay despite congestion

A SENIOR official yesterday appeared to rule out approvals for new underground railway projects, or subways, in China this year despite demand from many cities to relieve worsening traffic congestion.

'Seven or eight cities have applied to build subways,' said Zhao Baojiang, Vice-Construction Minister as he walked through one of the stations in China's fourth urban metro system, in Guangzhou, which opened yesterday.

'We have not approved them. We are still doing research,' he said.

Asked if approval for any was likely this year, he said: 'Maybe we will continue researching.' In principle, Beijing supports construction of urban subways to relieve congestion that has worsened because of the rise in car ownership, especially by private individuals, and inability of road construction to keep up.

China has more than 30 cities with a population of more than one million, all in need of better mass transport systems. Only four - Beijing, Shanghai, Tianjin and Guangzhou - have subways in operation.

The key issue is how to pay for the subways, which remain money-losing propositions and therefore unattractive to private investors.

Guangzhou is one of the most economically attractive cities for building a subway. It has the nation's highest per capita income, a strong real estate market, a high level of private home ownership and of inward investment.

Cities in the interior or northeast could not charge the fare of three yuan (about HK$2.82) in Guangzhou nor attract comparable levels of investment in real estate development round the stations.

Guangzhou Vice-Mayor Wu Liang said the subway would not make a profit for 15 years. The cost of the first line is 12.71 billion yuan, one third from land sales, one third from loans - mainly low-interest loans from foreign governments - and one third from the city budget.

Mr Wu put annual debt repayments at 300 million yuan, which can easily be met from ticket sales, advertising and leasing of commercial space. The foreign government loans, at low interest, are to be repaid over 30 years.

He said income from land sales was little affected by a government austerity programme launched in July 1993, with Guangzhou posting annual economic growth of 19.8 per cent from 1991 to 1995.

What makes the Guangzhou subway so expensive is the underground structure of rock, mud, sand and silt, and the two billion to three billion yuan the city government has to spend to rehouse 100,000 people displaced by the line.

The biggest foreign loan was 720 million deutschemark (about HK$3.21 billion) from the German Government to finance contracts with Adtranz and Siemens.

Wolfram Martinsen, senior vice-president of Siemens, said China was the biggest potential market in the world for mass transport systems.

Given the number of passengers involved, subways in China could be profitable, but the project had to be structured in the right way, while elevated railways were much cheaper, he said.

He was attending the opening of the Guangzhou line.

'I do not understand why they all select underground systems. In a city like Guangzhou, there is a good chance to do it elevated as well,' he said.

Siemens is involved in a privately financed elevated rail project in Bangkok.