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https://www.ft.com/content/90665d08-f915-11e8-af46-2022a0b02a6c
Gabriel Wildau in Shanghai and Yizhen Jia in Suzhou 7 HOURS AGO Print this page7 The marshlands on the outskirts of Suzhou, a city of 11m about 100km west of Shanghai, are home to pods of pelicans — and a subway station. Mulberry Plantation is the final stop on Suzhou’s subway line 2 — a terminus that a station security guard estimated was used by a total of 100 passengers during morning and afternoon rush hours. “It’s so desolate here that not many people take the subway,” said a 74-year-old landscaper surnamed Gu, who lives in the sparsely populated area. With China’s economy slowing due to weakening domestic investment and pressure from US tariffs, policymakers have turned to subway construction as a tool of fiscal stimulus. But while subway projects provide a short-term economic boost, the new train lines attract few riders, while the resulting debt burden threatens to weigh on long-term growth, experts say. In August, China’s state planning agency, the National Development and Reform Commission (NDRC), approved a Rmb95bn ($13.8bn) project in Suzhou for four new lines including line 6, which will pass through Mulberry Plantation. “From 2003 to 2008, policy implementation was quite good, but after 2008, in order to drive economic growth, things got a bit loose. Subways were approved in cities that strained to meet the requirements,” said Zhang Jiangyu, former vice-director of planning at the Institute of Comprehensive Transportation, a think-tank that advises the NDRC. Just as China’s intercity high-speed rail network expanded at breakneck speed over the past decade, China also binged on subway construction over the same period. Between 2014 and 2017, China accounted for 68 per cent of new subway lines globally and more than half of ridership growth, according to the International Association of Public Transport, known by its French acronym UITP. But while China accounted for 30 per cent of global city rail at the end of last year by track length, it accounted for only a quarter of ridership, a sign that some lines were underused. The Suzhou subway approval this year marked a policy reversal. Last year, concerns about local government debt caused Beijing to halt a subway project in Baotou, a small city in Inner Mongolia. That sparked a wave of suspensions, including in Hohhot, capital of Inner Mongolia, and Wuhan, capital of Hubei province. As recently as June this year, China’s cabinet was still in austerity mode, warning that some subway projects were not based on “actual needs” and had “increased the burden of local debt”. The effort to reduce debt-financed infrastructure was part of a broader campaign to tackle financial risk from rising corporate, household and local government debt since the 2008 financial crisis. But this deleveraging campaign caused a slowdown in infrastructure investment this year, dragging down overall GDP growth. In July, as the growth slowdown became evident, the Communist party’s politburo — its top policymaking body — called for accelerated infrastructure spending. The meeting signalled that Beijing was shifting focus away from deleveraging towards fiscal and monetary stimulus. Over the next few months, provincial governments flooded China’s debt markets with special bonds designed to finance infrastructure, including subways. The next politburo meeting, in late October, omitted all mention of “deleveraging”, a departure from similar statements over the past two years. “Infrastructure investment fell seriously short of the mark in the first half of this year. Many projects that should have been built weren’t built and others were half-built and then ran out of funding. So we’ll do what we must,” said Zhao Quanhou, director of the financial research centre at the Chinese Academy of Fiscal Sciences, a think-tank that advises the finance ministry. “But the current infrastructure acceleration can’t possibly be a return to the red hot pace of the post-2008 period. That was an excessive response, and we’ve endured hardship in the aftermath.” The marshlands surrounding Mulberry Plantation subway station on the outskirts of Suzhou © Jia Yizhen Suzhou is not an isolated case. In October, the agency approved a Rmb21bn intercity subway project connecting Nanjing, capital of Jiangsu, with the satellite city of Jurong. In July, the NDRC approved a Rmb95bn subway project in Changchun, capital of Jilin province in China’s rust-belt north-east. In Xi’an, capital of central China’s Shaanxi province, the approval process for a proposed subway expansion plan stalled last year. But in August an NDRC-led feasibility study gave the plan a positive assessment, clearing the way for final approval. “Looking at demand, Changchun is somewhat unconvincing. Based on the various indicators, it just barely qualifies,” said Mr Zhang. “They should focus on other options like light rail or electric trolley cars.” Despite such warnings, suppliers have received new orders.
https://www.ft.com/content/90665d08-f915-11e8-af46-2022a0b02a6c
Gabriel Wildau in Shanghai and Yizhen Jia in Suzhou 7 HOURS AGO Print this page7 The marshlands on the outskirts of Suzhou, a city of 11m about 100km west of Shanghai, are home to pods of pelicans — and a subway station. Mulberry Plantation is the final stop on Suzhou’s subway line 2 — a terminus that a station security guard estimated was used by a total of 100 passengers during morning and afternoon rush hours. “It’s so desolate here that not many people take the subway,” said a 74-year-old landscaper surnamed Gu, who lives in the sparsely populated area. With China’s economy slowing due to weakening domestic investment and pressure from US tariffs, policymakers have turned to subway construction as a tool of fiscal stimulus. But while subway projects provide a short-term economic boost, the new train lines attract few riders, while the resulting debt burden threatens to weigh on long-term growth, experts say. In August, China’s state planning agency, the National Development and Reform Commission (NDRC), approved a Rmb95bn ($13.8bn) project in Suzhou for four new lines including line 6, which will pass through Mulberry Plantation. “From 2003 to 2008, policy implementation was quite good, but after 2008, in order to drive economic growth, things got a bit loose. Subways were approved in cities that strained to meet the requirements,” said Zhang Jiangyu, former vice-director of planning at the Institute of Comprehensive Transportation, a think-tank that advises the NDRC. Just as China’s intercity high-speed rail network expanded at breakneck speed over the past decade, China also binged on subway construction over the same period. Between 2014 and 2017, China accounted for 68 per cent of new subway lines globally and more than half of ridership growth, according to the International Association of Public Transport, known by its French acronym UITP. But while China accounted for 30 per cent of global city rail at the end of last year by track length, it accounted for only a quarter of ridership, a sign that some lines were underused. The Suzhou subway approval this year marked a policy reversal. Last year, concerns about local government debt caused Beijing to halt a subway project in Baotou, a small city in Inner Mongolia. That sparked a wave of suspensions, including in Hohhot, capital of Inner Mongolia, and Wuhan, capital of Hubei province. As recently as June this year, China’s cabinet was still in austerity mode, warning that some subway projects were not based on “actual needs” and had “increased the burden of local debt”. The effort to reduce debt-financed infrastructure was part of a broader campaign to tackle financial risk from rising corporate, household and local government debt since the 2008 financial crisis. But this deleveraging campaign caused a slowdown in infrastructure investment this year, dragging down overall GDP growth. In July, as the growth slowdown became evident, the Communist party’s politburo — its top policymaking body — called for accelerated infrastructure spending. The meeting signalled that Beijing was shifting focus away from deleveraging towards fiscal and monetary stimulus. Over the next few months, provincial governments flooded China’s debt markets with special bonds designed to finance infrastructure, including subways. The next politburo meeting, in late October, omitted all mention of “deleveraging”, a departure from similar statements over the past two years. “Infrastructure investment fell seriously short of the mark in the first half of this year. Many projects that should have been built weren’t built and others were half-built and then ran out of funding. So we’ll do what we must,” said Zhao Quanhou, director of the financial research centre at the Chinese Academy of Fiscal Sciences, a think-tank that advises the finance ministry. “But the current infrastructure acceleration can’t possibly be a return to the red hot pace of the post-2008 period. That was an excessive response, and we’ve endured hardship in the aftermath.” The marshlands surrounding Mulberry Plantation subway station on the outskirts of Suzhou © Jia Yizhen Suzhou is not an isolated case. In October, the agency approved a Rmb21bn intercity subway project connecting Nanjing, capital of Jiangsu, with the satellite city of Jurong. In July, the NDRC approved a Rmb95bn subway project in Changchun, capital of Jilin province in China’s rust-belt north-east. In Xi’an, capital of central China’s Shaanxi province, the approval process for a proposed subway expansion plan stalled last year. But in August an NDRC-led feasibility study gave the plan a positive assessment, clearing the way for final approval. “Looking at demand, Changchun is somewhat unconvincing. Based on the various indicators, it just barely qualifies,” said Mr Zhang. “They should focus on other options like light rail or electric trolley cars.” Despite such warnings, suppliers have received new orders.
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