China is investing billions in flashy new rail networks. Nevertheless the vast majority of China’s urban population still relies on public buses as the main mode for getting around, but they see far fewer of the upgrades in speed and conditions enjoyed by rail passengers. Whereas rich cities like Beijing, Shanghai and Shenzhen have enacted measures to update bus transit, poorer second and third tier cities have struggled to develop clear policies. Ten years ago local governments began encouraging private investment in state-owned transit operations as a way to replace public financing with private capital, all the while maintaining tight regulations on operators. Even transporters like Hong Kong-based Kowloon Bus and Singapore-based Comfort Delgro were lured to invest in bus networks around China, only to quietly leave again due to poor returns and a lack of government support.
The problem is that organised urban bus transit is rarely profitable anywhere in the world, and usually some form of public funding is required for it to remain viable. Whilst the central government started paying out subsidies to China’s urban bus operators in 2007, payment cycles are unclear and subsidy amounts seem to fluctuate at random, leaving bus operators wondering what to expect with each coming year. Even though passenger numbers are increasing, a doubling of domestic fuel prices over the past three years and salary expectations of drivers growing as much as fifteen percent per year far outpace any revenue gains achieved. Local governments impose artificially low fares in the interest of social harmony, and the result is an industry mired by cash difficulties and unable to retain staff. Recent central government announcements pay lip service to the promotion of bus transit, but stop short of providing a comprehensive framework for funding, shifting the burden instead to local governments.
China’s urban utility sector on a whole remains a murky world of local government collusion where outside investors have limited sway over decision-making. Local governments tend to favour supporting enterprises in profitable industries which will contribute to local GDP quotas imposed by Beijing. Bus operations are granted only the most basic funding necessary to assure minimum service and prevent any embarrassing public discontent that could endanger officials’ career prospects. Modifying fare levels is avoided for fear of public outcry, especially if the goal is only to please profit-oriented investors. In turn investors complain that they are warmly welcomed when bringing cash to the table but later receive a chillier reception when seeking government support.
Still, optimistic investors including French transport operators Veolia Transport and RATP Development, who jointly invested in bus operations in Nanjing, are banking on the rapid evolution of an open and transparent system for the funding of bus operations, thereby allowing operators to concentrate on service improvements while still enjoying a reasonable profit for their efforts. They cite reforms of other public utility sectors such as water and natural gas as models for China’s public transport. With a rapidly urbanising population, it is believed that government can no longer ignore the importance of bus transit. Bus users in China can only hope that reform will arrive at their stop sometime soon.
Ted Varani has been researching and working in the public infrastructure industry for seven years in both China and overseas, and is currently representing French transportation operators Veolia Transdev RATP in Nanjing.
Author: Ted Varani
Photo: Ted Varani, HNC News Community