Demand side of the Cu equation?

China to Boost Urban Transport as City Congestion Worsens

China pledged to relieve pressure on the nation’s congested roads by supporting the development of environmentally friendly urban transport systems and encouraging measures that may include a ban on parking in some areas.

The government will provide tax breaks and fuel subsidies for mass transit vehicles and increase the use of special lanes to help boost the use of public transport to about 60 percent of all urban travel, according to a statement by the State Council, or cabinet, posted on the central government’s website today.

As many as 300 million of China’s 1.4 billion people will move from the countryside by 2030 to join the 600 million already living in cities, according to Organization for Economic Cooperation and Development estimates. Traffic congestion and worsening pollution is forcing the government to improve urban public transport to cope with the influx.

“As China’s urbanization accelerates, the development of urban transport faces new challenges,” the State Council said in its statement. The government “must prioritize the development of public transit systems to ease traffic congestion, transform urban transport, improve people’s quality of life and improve the provision of public services,” according to the document.

Li Keqiang, No 2 in the ruling Communist Party’s hierarchy, is championing urbanization as a new growth engine that will boost incomes and consumption. The focus on improving public transport comes as the government faces growing discontent over pollution that’s caused partly by surging car ownership.

Car Ownership

The number of private passenger vehicles in China was 62.4 million at the end of 2011, a sevenfold increase on the 8.45 million at the end of 2003, according to National Bureau of Statistics data. The number of cars may surpass 200 million by 2020, the official Xinhua News Agency reported on July 31, citing the Ministry of Transport.

Today’s statement fleshes out a broad policy guideline issued in October to support the transport goals in the nation’s current five-year plan which runs through 2015.

The State Council said it aims to make public services the “dominant” form of transport in urban areas and boost the use of electric vehicles such as buses and street cars in addition to rail transit. It will also encourage the development of smart cards and mobile payment systems.

Initiatives such as increasing the use of vehicle rental and better taxi-booking facilities will be supported, it said. In downtown areas, there should be a bus stop every 500 meters and special shuttle services, including airport and school buses, will be allowed to use public transport lanes, the State Council said.

Strategic Investors

The statement didn’t provide details about the financing of any initiatives, how public transport companies and local governments can fund projects or how much the tax breaks and subsidies will cost the government. The State Council did say it will encourage local providers to attract strategic investors, and raise private capital through trusts and equity investments.

Companies that may benefit from the policies include BYD Co., the Shenzhen-based automaker partially owned by Warren Buffett’s Berkshire Hathaway Inc., which is developing electric buses and taxis for the public transport sector.

China, home to 16 of the world’s 20 most polluted cities, according to the World Bank, has accelerated approvals for the construction of local transport networks across the country.

Subway Expansion

The National Development and Reform Commission last month authorized the construction of 456 kilometers of subway in Changsha, the capital of Hunan province, involving initial investment of 63.7 billion yuan ($10 billion) and has allowed similar projects in cities including Fuzhou and Urumqi.

Hangzhou, capital of the eastern Zhejiang province, in November opened its first subway line and plans to build another nine by 2020, according to a Nov. 24 Xinhua report.

Beijing put four subway routes into operation on Dec. 30, bringing the number of lines in the Chinese capital to 16. The city, with a population of more than 20 million, already caps the number of new auto registrations and limits the use of private vehicles on designated days based on their license plate numbers. The government is planning to build a road-congestion charging system, the city’s transport commission said in August.

Shanghai, Guangzhou and Guiyang are among cities that also impose restrictions on vehicle ownership. Xi’an, capital of Shaanxi province, broadened traffic controls from Jan. 1, banning vehicles deemed heavily polluting based on their emissions from inside the city’s second ring road.

--Tian Ying, Feifei Shen. Editor: Nerys Avery

To contact Bloomberg News staff for this story: Nerys Avery in Beijing at [email protected]