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New Ideas for Beijing No. 4 Subway Line

On October 10, 2005, the Beijing No.4 subway line, the first exclusive-operation project with investment from the Beijing Municipal Government and the Hong Kong Special Administrative Region (HKSAR), was approved by the State Development and Reform Commission of the People's Republic of China.

The collaboration between Beijing and Hong Kong timely solves problems that arose with the speeded development of Beijing's transportation system. As the 2008 Beijing Olympic Games draw near and in accordance with the Beijing 2004-15 Track Transportation Development Plan, about 260 kilometres of urban, tracked transportation lines will be built to meet the city's transportation and urban development needs and those of the Olympic Games. Total investment is estimated to reach 100 billion yuan (US$12.36 billion). But lagging investment, construction and operational abilities were found to be a barrier to Beijing's track transportation development. Thus, the introduction of HKSAR's investment and an operational format that provides solutions for Beijing.

Construct and Operate Separately

The Beijing No. 4 subway line with Majialou in Fengtai District as its southern end and Beigongmen of the Summer Palace at the northern end is about 27.69 kilometres in length. Total investment in the project will be about 15.3 billion yuan (US$1.89 billion). Construction was divided into two sections, A and B, with Section A referring to the tunnel digging and track laying, which will cost about 10.7 billion yuan (US$1.32 billion), about 70 percent of the total investment. This will be undertaken by the Beijing No. 4 Subway Line Investment Corporation Limited and will be transferred to the Beijing Jinggang Subway Company Limited, a joint venture of the Capital Group in Beijing and MTR from the Hong Kong SAR, for operation, maintenance, equipment renewal and in-station commercial operations for 30 years under the Agreement for Exclusive Operation. Afterwards the operational rights will return fully to the Beijing Municipal Government.

Section B covers investment in electrical and mechanical equipment related to vehicles, signals and auto-ticket-checking systems with about 4.6 billion yuan (US$570 million) funded by the Beijing Jinggang Subway Company Limited, accounting for 30 percent of the total investment. This "profitable section" will be developed and operated under the BOT (build, operate, transfer) format where not only investment but also the advanced experience of outside managers are brought by the company from the HKSAR.

Cooperation with HKSAR Attracts Attention

MTR Corporation, the minor partner in the Beijing No.4 subway line, was founded in 1975 and has HK$106.67 billion in assets. Seven subway lines in the HKSAR are under its operation. In 2004，daily passengers rates in the HKSAR's subway system rose to 2.3 million persons and the permitted interval of the train was 105 seconds which caused it to be regarded as the busiest subway system in the world. And the amazing thing is, while 90 cities were losing money in their subway operations, the HKSAR earned a lot. Ever since MTR was listed in 2000, its annual net profits have been above HK$4 billion every year.

Among the revenue streams of the MTR, in addition to the income brought by tickets fares, the subway's real estate holdings takes a large proportion. Many residential and commercial buildings have been built up to make more benefits for the shareholders. Along with these real estate projects, many subway passengers are created. Moreover, MTR also provides advertising services for stores. It also acts as a consultant for railway-operation institutions.

Doubt and Believe 

The subway line will be under the operation of a company; that fact alone arouses many concerns in Beijing, especially when the subject of ticket charges is raised. But the Beijing No.4 Subway Line Exclusive Operation Agreement will calm the doubters. As listed in the agreement, the development of electrical and mechanical equipment will be under supervision of the government; tickets prices will be set in accordance with relevant laws and regulations, which should indicate that ticket prices will be in line with prices in the rest of the subway network. Fares will be adjusted in accordance with the development of the economy. For the sake of the security of the public, the government will interfere in cases of emergency.

But many problems remain at MTR's side. The ticket price is one of them. In the HKSAR, MTR can decide how much the passengers should be charged. But in Beijing, only the government has the right to decide ticket fees and MTR won't get any allowances from the Beijing Municipal Government. In addition, the real estate development that MTR is expert at is pending and has not even been mentioned by any official from the Beijing city government.

So how will MTR operate in Beijing? The problem is left to MTR.

Though some uncertainties still exist, the BOT format for the No.4 subway line is a good start for the track transportation construction and operation system.