China Urban Transport: China Urban Transport: keeping it ‘clean’keeping it ‘clean’

Graham SmithGraham SmithChina Environment ForumChina Environment Forum

Nov 30, 2006Nov 30, 2006with thanks to Zhi Liuwith thanks to Zhi Liu

China has succeeded in developing a world class China has succeeded in developing a world class automotive industry within 10 years.automotive industry within 10 years.

The development of automotive industry drives national The development of automotive industry drives national economic growth.economic growth.

The use of automobiles enhances mobility and The use of automobiles enhances mobility and generates economic benefits to users (firms and generates economic benefits to users (firms and households). households).

China’s auto industrial China’s auto industrial development is a major economic development is a major economic success …success …

The process also causes a range of The process also causes a range of urban transport problems… urban transport problems…

Green House Gas Effect

Energy Security / Fuel Prices

Financial Liabilities

Farmland Conversion

Traffic Accidents

Auto Pollution

Traffic Congestion

GLOBAL

LOCAL

NATIONAL

Green House Gas Effect

Energy Security / Fuel Prices

Financial Liabilities

Farmland Conversion

Traffic Accidents

Auto Pollution

Traffic Congestion

GLOBALGLOBAL

LOCALLOCAL

NATIONALNATIONAL

BeijingBeijing: Experienced tenfold increase of private cars in : Experienced tenfold increase of private cars in the last 10 years, and widespread congestionthe last 10 years, and widespread congestion

ShanghaiShanghai: Experienced increases of private cars from : Experienced increases of private cars from 10k to 250k in 8 years and rising congestion10k to 250k in 8 years and rising congestion

ShenzhenShenzhen: Traffic accidents are a main cause of death, : Traffic accidents are a main cause of death, especially among the 20-40 age groupespecially among the 20-40 age group

NationwideNationwide: Carbon monoxide and hydrocarbon from : Carbon monoxide and hydrocarbon from auto emissions account for nearly 80% of the total in auto emissions account for nearly 80% of the total in urban areas. urban areas.

Urban transport problems are Urban transport problems are getting worse at the local level…getting worse at the local level…

No coherent urban transport strategyNo coherent urban transport strategy

Piecemeal and Piecemeal and ad hocad hoc approach approach

Heavy investment in road capacityHeavy investment in road capacity

Bicycle rights-of-way dismantledBicycle rights-of-way dismantled

Pedestrian sidewalks and roadside trees Pedestrian sidewalks and roadside trees eliminatedeliminated

Parking not managedParking not managed

China’s piecemeal approach so far China’s piecemeal approach so far to deal with motorizationto deal with motorization

Majority of households are car-less.Majority of households are car-less.

Their needs for mobility are seriously under-served.Their needs for mobility are seriously under-served.

Little attention is paid to the transport needs of migrant Little attention is paid to the transport needs of migrant workers.workers.

Car-owning population is often stuck in traffic jams.Car-owning population is often stuck in traffic jams.

As a nation gets richer, its hospitals and schools get As a nation gets richer, its hospitals and schools get better, but its traffic only gets worse.better, but its traffic only gets worse.

There are no clear winners while There are no clear winners while the poor are suffering the most…the poor are suffering the most…

Efficient public transport system is needed.Efficient public transport system is needed. Significant improvements in bus systems were Significant improvements in bus systems were

made in the 90s.made in the 90s. But road congestion is making bus operations But road congestion is making bus operations

more and more difficult.more and more difficult. Urban master plans give too much weight to the Urban master plans give too much weight to the

development of road network, not enough to public development of road network, not enough to public bus transport.bus transport.

Development of an efficient public transport Development of an efficient public transport industryindustry is at an early stage. is at an early stage.

PublicPublic busbus transport is at a fragiltransport is at a fragile e point…point…

Many cities aspire to a Mass Rapid Transit (MRT) Many cities aspire to a Mass Rapid Transit (MRT) system as a centerpiece of urban transport solution system as a centerpiece of urban transport solution

But most of them lack the financial capacity.But most of them lack the financial capacity. MRT involves high debt and long construction MRT involves high debt and long construction

periods.periods. Alternatives to MRT are needed.Alternatives to MRT are needed. Bus Rapid Transit (BRT) is considered the best Bus Rapid Transit (BRT) is considered the best

choice.choice.

Financial capacity to develop a rail-Financial capacity to develop a rail-based mass transit system is based mass transit system is limited in most cities…limited in most cities…

Slow and congested transport system stifles the Slow and congested transport system stifles the efficiency of the urban economy.efficiency of the urban economy.

Excessive conversion of farmland for urban Excessive conversion of farmland for urban development wastes scarce resources.development wastes scarce resources.

Excessive investment in urban transport incurs Excessive investment in urban transport incurs heavy financial liabilities.heavy financial liabilities.

Rising fuel consumption endangers the nation’s Rising fuel consumption endangers the nation’s long-run energy security.long-run energy security.

Growing green house gas (GHG) emissions are Growing green house gas (GHG) emissions are increasingly an international concern. increasingly an international concern.

Spillover effects are threatening the Spillover effects are threatening the overall sustainability, while travel overall sustainability, while travel mobility is declining…mobility is declining…

Chinese cities are generally able to mobilize Chinese cities are generally able to mobilize resources for urban transport.resources for urban transport.

There is also progress in traffic management, BRT, There is also progress in traffic management, BRT, and adoption of higher emission standards.and adoption of higher emission standards.

But sustainable outcomes are generally not being But sustainable outcomes are generally not being achieved.achieved.

International knowledge on sustainable urban International knowledge on sustainable urban transport has not been effectively translated into transport has not been effectively translated into actions.actions.

Lack of sustainability is at the core Lack of sustainability is at the core of the urban transport issues…of the urban transport issues…

Strong economic forces and incentives will Strong economic forces and incentives will continue to drive motorization, significantly continue to drive motorization, significantly increasing fuel consumption and GHG emissions.increasing fuel consumption and GHG emissions.

Cities will face major problems in: Cities will face major problems in: Exhaustion of fuels, clean air, and farmland Exhaustion of fuels, clean air, and farmland Worsening social inequalityWorsening social inequality

Problems will get worse unless Problems will get worse unless public policy manages to address public policy manages to address them…them…

Urbanization is accompanied by:Urbanization is accompanied by:

Rising household incomes that increase demand for private Rising household incomes that increase demand for private carscars

Transformation from farms to firms that results in urban Transformation from farms to firms that results in urban migration, growing demand for urban space, and the migration, growing demand for urban space, and the formation of large metropolitan areasformation of large metropolitan areas

Changes in living style that create a more diversified range of Changes in living style that create a more diversified range of travel demands travel demands

Changes in urban land use patterns that are increasingly Changes in urban land use patterns that are increasingly dependent on motorized transportdependent on motorized transport

Rapid urbanization is putting heavy Rapid urbanization is putting heavy pressure on urban transport…pressure on urban transport…

Metropolitan areas are taking Metropolitan areas are taking shape, engines of economic shape, engines of economic growth…growth…

The Role of the Three Metropolitan Areas

0 10 20 30 40 50 60 70

Land Area

Urban Built-up Area

Population

Retail Sales

National GDP

Value of Industrial Production

Public Revenues

Import-Export Volumes

Foreign Investment

Share of National Total (%)

And the suburbs are growing fast…And the suburbs are growing fast…

Change of Population Distribution in Beijing

0

1

2

3

4

5

6

7

Inner Districts Outer Districts

mil

lion

pop

ulat

ion

1990

2000

Municipalities assume primary responsibilities for Municipalities assume primary responsibilities for urban transport, but with weak municipal revenue urban transport, but with weak municipal revenue base.base.

Cities rely heavily on off-budget funds for urban Cities rely heavily on off-budget funds for urban transport investment.transport investment.

National government does not have sufficient National government does not have sufficient financial leverage for urban transport policy financial leverage for urban transport policy implementation at the local level.implementation at the local level.

There is an institutional void in addressing the There is an institutional void in addressing the spillover effects.spillover effects.

Decentralization is changing the Decentralization is changing the ways of urban management and the ways of urban management and the modes of service delivery…modes of service delivery…

There is a lag of institutional reform to respond to There is a lag of institutional reform to respond to the rapidly changing urban context. the rapidly changing urban context.

The challenge is how to shorten the lag.The challenge is how to shorten the lag.

The cost of inaction or slow action will be high.The cost of inaction or slow action will be high.

Institutions have not kept pace with Institutions have not kept pace with the decentralization…the decentralization…

Inadequacies found in four mechanisms:Inadequacies found in four mechanisms:

IncentivesIncentives: too much focus on GDP and Foreign Direct : too much focus on GDP and Foreign Direct InvestmentInvestment

Urban planningUrban planning: inherent rigidity, lack of stakeholder : inherent rigidity, lack of stakeholder participation, weak enforceability, and de-link between participation, weak enforceability, and de-link between plan and budgetplan and budget

Checks and balancesChecks and balances: often intervene too late in the : often intervene too late in the planning and implementation processplanning and implementation process

Municipal financingMunicipal financing: expenditure responsibilities larger : expenditure responsibilities larger than revenues can bearthan revenues can bear

Inadequacies in urban institutions Inadequacies in urban institutions and their policy making cause and their policy making cause failures in urban transport…failures in urban transport…

Green-GDP concept proposed and being appliedGreen-GDP concept proposed and being applied People-centered development concept advanced by the People-centered development concept advanced by the

top leadershiptop leadership Public transport received attention from highest level Public transport received attention from highest level

leadershipleadership Public opinions and criticism increasingly heard and Public opinions and criticism increasingly heard and

influential influential Planning and decision making process increasingly openPlanning and decision making process increasingly open

Political context is shifting in favor Political context is shifting in favor of institutional reform for of institutional reform for sustainable urban transport…sustainable urban transport…

Potential pay-off from policy Potential pay-off from policy interventions is high…interventions is high…

2005Actual

2020 RoadAhead

2020 OilSaved 2020 Cities

Saved

Fuel

GHG0

100

200

300

400

500

600

700

800

900

1000

Predicted Fuel Consumption and GHG Emissions (2005 Level = 100)

Institutions matter the most at the stage of rapid Institutions matter the most at the stage of rapid development and social transformation.development and social transformation.

Emerging complexities of urban economy and Emerging complexities of urban economy and transport require forward-looking institutions which transport require forward-looking institutions which are adaptive to changes and capable of managing are adaptive to changes and capable of managing a sustainability agenda.a sustainability agenda.

But it will depend on capable But it will depend on capable institutions and their instruments institutions and their instruments to manage urban transport…to manage urban transport…

Redefine the role of the national government in urban Redefine the role of the national government in urban transport to enhance transport to enhance coordinationcoordination and and risk managementrisk management

Develop Develop accountabilityaccountability mechanisms and a strengthened mechanisms and a strengthened local governance structure for urban transportlocal governance structure for urban transport

Build up the institutional capacity for strategic planning, as Build up the institutional capacity for strategic planning, as a basis for effective a basis for effective coordinationcoordination

Establish the linkage between urban transport planning and Establish the linkage between urban transport planning and financing, to enhance financing, to enhance coordinationcoordination and and accountabilityaccountability

Develop a sustainable and transparent financing Develop a sustainable and transparent financing mechanism, as a foundation for financial mechanism, as a foundation for financial risk managementrisk management

Develop a viable public transport industry as a center piece Develop a viable public transport industry as a center piece of urban transport services for of urban transport services for inclusive developmentinclusive development

Proposed ActionsProposed Actions

Providing policy directionsProviding policy directions

Rewarding good practices financiallyRewarding good practices financially

Adopting a transport performance benchmarking Adopting a transport performance benchmarking and evaluation systemand evaluation system

Guiding municipal financial reformGuiding municipal financial reform

Supporting an urban transport demonstration pilot Supporting an urban transport demonstration pilot programprogram

Action 1: Redefine the Role of the Action 1: Redefine the Role of the National Government in Urban National Government in Urban TransportTransport

Green-GDP and resident approval rating as key Green-GDP and resident approval rating as key performance indicators for municipal government performance indicators for municipal government

Empowering local People’s CongressEmpowering local People’s Congress Monitoring the planning and implementation Monitoring the planning and implementation

processprocess Evaluating municipal leaders’ performanceEvaluating municipal leaders’ performance Approving the key municipal appointmentsApproving the key municipal appointments Promoting public consultation and Promoting public consultation and

participation processparticipation process

Action 2. Develop Accountability Action 2. Develop Accountability Mechanism and a Local Mechanism and a Local Governance Structure for Urban Governance Structure for Urban TransportTransport

Strategic planning should be adopted as the basis Strategic planning should be adopted as the basis for effective coordination.for effective coordination.

Urban transport strategic planning should be part Urban transport strategic planning should be part of the urban development strategic planning of the urban development strategic planning process.process.

Capacity building is a key challenge for most cities.Capacity building is a key challenge for most cities.

Action 3. Strengthen the Action 3. Strengthen the Institutional Capacity for Strategic Institutional Capacity for Strategic PlanningPlanning

Transparency in planning and budgeting would Transparency in planning and budgeting would enhance sustainability.enhance sustainability.

A prioritization plan for urban infrastructures by A prioritization plan for urban infrastructures by sector is needed, and Capital Improvement Plan sector is needed, and Capital Improvement Plan should be introduced.should be introduced.

Asset management remains a top priority.Asset management remains a top priority.

A fiscally constrained plan for urban transport A fiscally constrained plan for urban transport brings feasibility and realism to the plan.brings feasibility and realism to the plan.

Action 4. Establish a Link between Action 4. Establish a Link between Urban Transport Planning and Urban Transport Planning and FinancingFinancing

Strengthening self-financing discipline of public entitiesStrengthening self-financing discipline of public entities Off-budget process should be made transparent in the Off-budget process should be made transparent in the

short term.short term. In the medium term, property tax and betterment charge In the medium term, property tax and betterment charge

should be introduced as reliable local revenues.should be introduced as reliable local revenues. Municipal borrowing should be permitted in the medium Municipal borrowing should be permitted in the medium

term, and ground works to strengthen municipal financial term, and ground works to strengthen municipal financial management should start now.management should start now.

Action 5. Develop a Sustainable Action 5. Develop a Sustainable and Transparent Financing and Transparent Financing MechanismMechanism

A healthy and efficient public transport industry as A healthy and efficient public transport industry as centerpiece of sustainable urban transportcenterpiece of sustainable urban transport

Shift of focus from enterprise reform to industry reformShift of focus from enterprise reform to industry reform Integration of public transport planning within a broader Integration of public transport planning within a broader

strategic land use and transport frameworkstrategic land use and transport framework Separation of planning responsibilities from those for Separation of planning responsibilities from those for

supply of servicessupply of services Efficient design of a franchising systemEfficient design of a franchising system Efficient implementation of the procurement and Efficient implementation of the procurement and

management of franchised servicesmanagement of franchised services Appropriate legal framework for competitively tendered Appropriate legal framework for competitively tendered

franchisingfranchising

Action 6. Develop a Viable Public Action 6. Develop a Viable Public Transport IndustryTransport Industry

Business interests of auto industry, banking, Business interests of auto industry, banking, insurance, and real estate will remain strong.insurance, and real estate will remain strong.

Urban traffic congestion will not deter the growth of Urban traffic congestion will not deter the growth of car ownership.car ownership.

Reforms of fiscal system and intergovernmental Reforms of fiscal system and intergovernmental fiscal relations to harden local budget constraint fiscal relations to harden local budget constraint are urgent --but will also be difficult. are urgent --but will also be difficult.

Capacity building for strategic planning and Capacity building for strategic planning and financial planning takes time.financial planning takes time.

Strong political commitment and immediate actions Strong political commitment and immediate actions are necessary.are necessary.

Political commitment to the real Political commitment to the real actions is actions is key to success …key to success …

Motorization is a process that brings benefits and Motorization is a process that brings benefits and costs to the economy and society.costs to the economy and society.

This is true in China and elsewhere.This is true in China and elsewhere.

The process must be carefully managed to The process must be carefully managed to minimize the social costs. minimize the social costs.

ENDEND

Motorization process should be Motorization process should be carefully managed…carefully managed…

Urban Master Plan

(20 year Planning Period)

Short Term Plan (3-5 years)

Detailed Land

Use Plan

Road Network

Plan

Public Transpor

t Plan

Other Sectoral

Plans

•Revenues

•Budgeting

•Financial Plans

The process today …

City Planning Domain Municipal Finance Domain

Urban Master Plan

(20-Year Planning Period)Short Term Plan

(3-5 years)

Detailed Land Use

Plan

Road Network

Plan

Public Transport

Plan

Other Sectoral

Plans

• Revenues

• Budgeting

• Financial Plans

The proposed process …

Capital Improvement Plan and Multi-Year Financial Plan

Strategic Planning• More than 20 years• Not constrained by jurisdiction• Land use/Transport Interaction

City Planning Domain Municipal Finance Domain