Theguidelinestipulatesthatthegeneralpublicbudgetrevenueofacitythatappliesformetroconstructionshouldbeatleast30billionyuan($4.43billion),or15billionyuan($2.22billion)fortheconstructionofalightrailnetwork.Grossregionaldomesticproductshouldreachaminimumof300billionyuan($44.68billion)toqualifyfortheconstructionofametrosystem,and150billionyuan($22.34billion)forlightrail.
Inprinciple,theurbanpopulationshouldbelargerthan3milliontojustifyametrorequestand1.5millionforlightrail.Meanwhile,proposedprojectsformetroandlightrailnetworksmustanticipatedailypassengerflowof7,000and4,000peopleperkilometer,respectively,intheprelimi-narystage,whileinthelongrun,peak-hourpassengerflowshouldreachmorethan30,000and10,000people,respectively.
Thenewguidelinealsopointsoutthatprojectsthatobtainsubstandarddebtfinancingorfailtospecifysourcefundingfordebtpaymentwillnotbeapproved.
Theactoffreezing,orcallingoffmetroprojects,isactuallytheresultofpolicymakersreexaminingplansforextensivemetroconstructionsincethesecondhalfof2017topreventtheriskoflocaldebtleveraging.
Promotinginfrastructureinvestmentwaspreviouslyatooltosupporttheeconomyamiddownwardpressure.Inpreviousyears,growingurbanizationsawmorepeoplemigratingtobigcitiesforwork,puttingastrainonthetrafficandtransportationstructuresofmanyareas.Thegovernmenthopedthattheconstructionofmetronetworksinsecond-tiercitieswoulddriveregionaldevelopment,encouragepeopletoliveincitiesclosertohomeandalleviatepressureonmegacities.
In2015,theNationalDevelopmentandReformCommission(NDRC)issuedaguidelinespecifyingthegovernment鈥檚roleintheapprovalofmetroapplications.Accordingtotheguideline,theNDRCisinchargeofverifyingrailtransitprogramsreportedbylocalgovernments,andlocalgovernmentsaretomakearrangementsfortheapprovalofspecificitems,investmentandfinancing.Sincethen,theconstructionofChina鈥檚railtransithasproliferated.
However,inordertostabilizegrowth,somelocalgovernmentshavedevelopedtoohurriedly,withoutthesupportoflocalpopulationsandindustries,asufficientbudgetandastablecashflowasasourceofrepayment.SomehaveexploitedcertainfavorablepoliciessuchasPublic-PrivatePartnership(PPP),whichwasoriginallyaimedatintroducingsocialcapitalandreducinglocaldebtbutisinsteadbeingmisusedasanopportunitytoimplementnewprojects.
WhileChinaisremodelingitsmanagementoflocaldebtbyrestrictingcentralgovernmentbailoutsandestablishingalifetimeaccountabilitysystem,financialorganizationsarestillscramblingforlocalgovernmentprojects,investingwiththeaidofshadowbanking,assumingthatthegovernmentwillbailthemoutshouldtheyrequireit.
Hence,theCentralGovernmenthasresolvedtosupervisethedebtvolumeoflocalgovernmentsandtheusageofdebtfunds,soastopursuehigh-qualitygrowthanderadicateprofligateprojectswhichamplifyfinancialrisk.
ThisisaneditedexcerptofanarticlewrittenbyLiYujia,aresearcherwiththeShenzhenRealEstateResearchCenter,publishedbytheNationalBusinessDailyCopyeditedbyLaurenceCoultonCommentsto