Subway projects may slow down as China reins in debt

Workers at the construction site of a subway line in Changzhou, Jiangsu province, last Friday. The National Development and Reform Commission wants to "raise the bar" for approving local rail projects amid growing concern over a debt-driven infrastru
Workers at the construction site of a subway line in Changzhou, Jiangsu province, last Friday. The National Development and Reform Commission wants to "raise the bar" for approving local rail projects amid growing concern over a debt-driven infrastructure boom, reported financial magazine Caixin.PHOTO: REUTERS

Beijing said to be concerned over ballooning infrastructure debt

BEIJING • China's frenzied construction of subway systems in cities all over the country may be easing, amid reports that funding has been pulled for some projects as Beijing pushes to rein in debt levels.

The National Development and Reform Commission (NDRC), China's top economic planning body, is revising a 2003 policy on subway development, Caixin reported on Saturday.

The NDRC wants to "raise the bar" for approving local rail projects amid growing concern over a debt-driven infrastructure boom, the financial magazine said, citing sources that it did not identify.

Population levels, as well as the economy and fiscal conditions of Chinese cities seeking permission for subway projects, will be more closely scrutinised, Caixin said.

The NDRC did not immediately reply to questions faxed to it on Saturday by Bloomberg News.

Subway construction is a constant presence in China's cities, with streets torn up to build the capacity needed to transport the swelling ranks of urban commuters.

Beijing alone has been testing three lines: a driverless subway, a maglev train and a tram to be launched in the city's western suburbs at year end, Xinhua news agency reported. But investment in the sector appears to be tapering off, just as China's leaders make reining in financial risks a top priority.

Fixed-asset investment in rail transport has slowed almost to a standstill this year, increasing just 0.4 per cent in January to October from a year earlier, statistics bureau data show. This is down from the 3.5 per cent growth in the first four months of the year. Private rail transport investment - which makes up a tiny share of an industry that is dominated by state-backed enterprises - slumped 58.6 per cent in January to October from a year earlier.

Cities in Inner Mongolia have been told by China's central government to halt infrastructure projects, Caixin reported earlier this month, including a 30 billion yuan (S$6.1 billion) subway project in the city of Baotou, and another valued at 27 billion yuan in the regional capital, Hohhot.

Bloomberg's calls to the media office of Hohhot's city government were not answered after regular business hours, and a hotline for the mayor of Baotou also was not picked up on Saturday.

Reduced rail investment would be a reversal for a country that has feverishly embraced trains. China operated nearly 2,600 high-speed trains at the end of last year, 60 per cent of the total worldwide, according to Xinhua. The fast-rail network has surpassed 20,000km and leaders are targeting 45,000km by 2030, Xinhua said in June.

In 2012, the NDRC approved plans for subways in 18 Chinese cities, including southern export powerhouses Guangzhou and Shenzhen. Back then, the body also authorised inter-city rail projects throughout Inner Mongolia, Gansu, Ningxia and Jiangsu province.

Still, Yicai Global, a state-backed business publication, reported in September that some 43 so-called third-tier cities - mostly in provinces in China's more populous east - secured approval to build subways as part of economic development and urbanisation efforts.

If China is taking a more discriminating approach to infrastructure growth, it marks an about-turn. In the wake of the global financial crisis, the government championed projects in far-flung provinces - from new highways to sports stadiums - as a way of keeping people employed and maintaining economic momentum. The spending saw leverage balloon to more than double the gross domestic product, a risk factor Beijing is now trying to tackle.

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A version of this article appeared in the print edition of The Straits Times on November 20, 2017, with the headline 'Subway projects may slow down as China reins in debt'. Print Edition | Subscribe