Related stories

Alexandre Fauvet talks about Business Beijing Rene S. Schmitt talks about Business Beijing Tao Jingzhou talks about Business Beijing Lincoln Venancio talks about Business Beijing Official: Bridge Linking Beijing and Foreign Business Communities

Adressing Beijing's Vulnerabilities with Cooperation

When the first snowfall of 2001 made commuting in Beijing all but impossible, most commuters found themselves confined to their homes.

The incident, revealing a transport Achilles' heel that must be remedied to serve the general needs of the metropolis and especially the 2008 Olympic Games, provoked some of Beijing's scholars and officials to examine Beijing's infrastructure much more closely.

Under Beijing's Urban Development Plan (2004-2020), the city is paying much more attention to the construction of a more modern infrastructure, including transportation, electrical and water supplies and waste treatment systems. The goal is to make Beijing the "nation's capital, an international city, a cultural capital and congenial city to live and work."

Opening the Construction Market

After many years of development, Beijing's urban construction leads the country, but much remains to be done before Beijing will become the kind of congenial city that its leaders and residents hope it will be.

Beijing is investing heavily in its infrastructure. In 2004, the Development and Planning Committee of the People's Government of Beijing Municipality put 11.1 billion yuan (US$1.37 billion) into infrastructural projects, an increase of 8 percent year-on-year. With the aid of the municipal government, 350 infrastructural projects were completed, representing a total investment of 44.7 billion yuan (US$5.52 billion).

But even this large sum of governmental investment is inadequate to meet Beijing's infrastructural needs, and the government continues to seek new approaches in addressing these outstanding financial problems.

Ding Xiangyang, director of the Development and Planning Committee of the People's Government of Beijing Municipality, said the solution lies in, "Opening the markets for infrastructural construction and operations and introducing investors from all fields."

This approach was chosen by the city for the construction of Beijing's No. 4 subway line. The whole project was divided into non-profitable sectors and profitable sectors with the ratio of the government to institutional investment set at seven to three. Investment in the non-profitable sections of tunnels and tracks, 70 percent of total investment, was provided by the government; the profitable sectors involving vehicles and automatic-ticket-checking equipment was opened to worldwide bidding under the BOT (build, operate, transfer) format. Among the bidders were the MTR Corporation of the HKSAR and the Capital Group of Beijing, who were chosen to construct the Beijing No.4 subway line.

But more opportunities lie in wait for HKSAR companies. MTR's investment in Beijing's subway construction is just one example of Beijing's absorption of institutional investment for infrastructural construction. Under the Items of Exclusive Operation for Urban Infrastructure in Beijing, and with the expansion of pertinent financial markets and preferential conditions listed in the CEPA, HKSAR companies will see even more chances to invest in Beijing.

Learn From the HKSAR

Beijing is striving to become an international, congenial city in which to live and work, something the HKSAR already achieved. So the HKSAR's urban-construction experience can well-serve the needs of Beijing.

The HKSAR also has rich experience in making its non-profitable infrastructure profitable.

Zhu Ying, general representative on the Chinese mainland for the Hong Kong Trade Development Council, said, "Integrate construction with operations." In the HKSAR, the construction of infrastructure has been placed completely into the market. Enterprises build and operate key infrastructural systems.

Contradictions do inevitably arise among the government, enterprises and the people who rely upon public services. The pressure to earn profits and to keep service prices low while retaining high-quality always exists. To deal with this kind of problem, Zhu said, the government has signed exclusive operating agreements concerning property and commerce with enterprises to ensure that they benefit properly from their participation in a project. Public supervision via institutions is used to prevent unreasonably high pricing by the enterprises.

Zhu said the usefulness of this function of social supervisory institutions in HKSAR was recently illustrated when world oil prices escalated and the operators of the HKSAR's public transportation system wanted to raise prices. Their request was rejected by supervisory institutions based on calculations that revealed that the higher oil prices could be digested by the company based on revenues from other aspects of their public transportation operation.

Exclusive Operating Agreements are already being used in dozens of construction projects affecting Beijing's infrastructure, including the No. 4 subway line and the Gaoan Tun Medical Waste Treatment Centre, and in other projects related to water and heating supplies, waste treatment, highway construction and in tracked transportation. Zhao Jupeng, deputy director of the Financial and Economic Committee of the Standing Committee of the People's Congress of the Beijing Municipality, said rates of return on investments are specifically listed in the exclusive operating agreements, some of which have terms as long as 30 years. The city is highly flexible in its agreements, which clearly elaborate development and operating rights in projects authorized by the government. The agreements may even be terminated before their expiration, based on negotiations.

With improvements in the construction and operation of Beijing's infrastructural systems, the city will be more able to withstand unexpected demands on its infrastructural system. A sudden rain storm or snowfall will not fall on an Achilles' heel in the city.