Replies to post #1472 on The Rising Influence of Rising Affluence

[DewDiligence]

China’s Growth-->Problems Down the Road

http://www.nytimes.com/2010/08/28/world/asia/28china.html

›August 27, 2010
By MICHAEL WINES

ZHANGJIAKOU, China — Chinese authorities proclaimed an end this week to an epic traffic jam that had brought some drivers here to a dead halt for up to five seemingly endless days. Which is heartening news, save two problems.

One is that the traffic jam has not ended. “That’s impossible,” an officer at the Zhangjiakou Highway Traffic Police Detachment said Friday. “All the lanes are filled up. If you get on the highway from Inner Mongolia to Hebei, you’ll be stuck for four or five days.”

The other is that it may not end until, oh, 2012.

The Great Chinese Gridlock of 2010 — up to 60 miles long, on a freeway linking Beijing and Inner Mongolia’s capital, Hohhot — has earned a welter of global publicity this month on tales of drivers marooned for days in immobile traffic lanes, and profiteering locals selling them freeze-dried noodles at usurious prices.

“I spent five days and five nights last week without moving,” a trucker who conceded only his last name, Li, said during a roadside chat outside this city on Thursday. “Apart from sleeping, you just eat. And you can only eat the instant noodles.” These cost about 45 cents, from a roadside hawker, plus $1.20, for the water needed to soften them.

The gridlock has been building for up to a year, the inevitable result of the difficulty of China’s construction crews in keeping up with China’s breakneck growth.

In this case, a government decision to satisfy surging demand for electric power by tapping Inner Mongolia’s coalfields has flooded local highways with thousands of coal trucks, overwhelming police officers’ best efforts to herd them.

The government is building two new rail lines on the trucks’ route, one for coal and the other for freight, as well as a second passenger-only line to relieve congestion. But those railroads will not open until at least 2012, and perhaps later.

And so huge traffic jams of the sort that plagued this road in August are all but guaranteed to continue. Indeed, logistics experts here say the miracle is that more such bottlenecks do not occur.

“China probably does a better job of executing on this kind of big infrastructure than almost any other country, anytime, anywhere,” said John Scales, in charge of transport issues for the World Bank’s Beijing office. But even in China, where niceties like environmental impact statements are dispensable, planning and executing huge construction projects takes years, not months.

The challenges facing Chinese builders are clear from the statistics, which by themselves are staggering.

This nation has been on a building binge for decades — and indeed, the highway from Beijing as it begins its way toward Mongolia would largely be familiar to any American interstate highway driver. In 2000, China boasted about 7,450 miles of such expressways. A decade later, it has 40,400 miles, not much smaller than the American system, which it plans to leapfrog by 2020.

Rail construction has moved almost as quickly: 2,500 miles of new track a year, the Communications Ministry says, along with upgrades on existing rail lines to improve trains’ speed and carrying capacity.

But the government’s construction plans have not dovetailed with its equally vast energy plans. Electricity output has more than doubled just since 2000, and coal-burning plants produce about two-thirds of that power, compared to one-half in the United States. Shaanxi Province, in Central China, once was the main coal source for power plants, but recent production and worker-safety problems there led the government to tap bigger coal deposits in Inner Mongolia, in China’s far north.

Therein lies a problem. Mongolian coal production has exploded — up 37 percent to 637 million tons last year alone, with an additional 15 percent increase expected this year. Much of the coal is supposed to move to seaports on China’s east coast, to be shipped to big cities in the south. But pig-in-python style, even China’s brand-new freeway system cannot handle the volume.

On an ordinary freeway, the 300-mile drive from Hohhot to Beijing would consume several hours. Here, China’s coal haulers say, the same trip generally requires up to three days’ travel, including weight checks and unloading coal. Recent traffic jams have pushed travel time to a week or more.

But even moving west to Beijing — a six-lane stretch that winds past popular Great Wall tourist sites — traffic jams can stall drivers for hours. On a recent evening, a passenger whiled away two hours on a deadened stretch 60 miles from Beijing, as thousands of coal trucks idled and vendors darted among the vehicles, selling apples and other treats.

“The more roads they build, the more congested it gets,” one trucker, 45-year-old Wang Haihe, volunteered. “And then they build some more roads.”‹

[DewDiligence]

Beijing Cracks Down on Car Buyers

[This story is the tip of the iceberg, and it’s clearly bullish for companies that sell products and services for urban mass transit. CUB is one such company.]

http://online.wsj.com/article/SB10001424052748704278404576037223377494828.html

›DECEMBER 23, 2010
By AARON BACK

BEIJING—Beijing's municipal government Thursday unveiled sweeping measures to curtail the number of cars sold in the city next year, in a bid to ease traffic chaos that could prompt similar moves in other Chinese cities and deepen an expected slowdown for the auto industry.

Beijing will limit the issuance of new car and microvan license plates in the city to 240,000 in 2011, about one-third of this year's figure, and only registered Beijing residents will be able to obtain one. Cars that don't have Beijing license plates will be barred from entering the main city area during rush hour.

Yale Zhang, an independent auto analyst, said the measures were more stringent than the market had expected. "Auto makers may have to adjust their production and sales plans next year," he said.

Shanghai has had similar restrictions on car sales for almost 10 years, but during that time, Beijing has "insisted it would not do so," Mr. Zhang said.

"The move by Beijing will basically cost auto makers half a million new car sales next year. But Beijing as the capital city can become an example for other cities in the future," he said.

The China Association of Auto Manufacturers reacted angrily, with the association's vice secretary, Xiong Chuanlin, making an unusually strong statement in opposition to the move. Mr, Xiong said the association opposes any regulations to restrict vehicle consumption in China.

"This is a negative example and other cities will follow it for sure," he said. "The auto market is a pillar industry."

Jin Yibo, spokesman of Chery Automobile Co., said: "Definitely this will impact our sales in Beijing next year, But it's hard to say what percentage will be affected specifically."

"In fact, what worries me more is that other cities will follow Beijing's lead to issue such regulations, and that will have a bigger impact," he added.

State media have reported that the eastern provinces of Jiangsu and Zhejiang are considering measures such as requiring residents to secure a parking space before being allowed to buy a car.

Beijing residents had been expecting new traffic restrictions, especially since a Beijing municipal committee this month recommended some vehicles be barred from entering certain roads during peak traffic times, as was announced Thursday. The committee's proposals didn't include a quota for license plates, however.

China's total auto sales rose 26.9% in November from the same month last year to 1.7 million units, the auto makers association said earlier. The strong growth rate was partly due to expectations of new traffic restrictions, but also because of the imminent expiration of some incentives for vehicle purchases. Total auto sales in the January-November period rose 34.1% from a year earlier to 16.4 million units.

China last year overtook the U.S. as the world's largest auto market, as the nation's rising middle class shuns bicycles and public transport and embraces cars instead. But Chinese cities have been unable to adapt quickly enough to the rapid rise in car usage, and increasingly face paralyzing traffic conditions.

In a sign of the sensitivity of a policy that could prevent Chinese families from attaining a cherished middle-class benchmark, at least some Chinese media were ordered by censors on Thursday to limit their reporting on the issue and to refrain from emphasizing any controversy, according to people with knowledge of the matter.

In Beijing, car ownership surged to 4.7 million vehicles this year from 2.6 million in 2005. Despite major investment in new subway lines, the city's roads have become gridlocked. A pre-holiday weekend in September was officially deemed to have the worst traffic conditions ever by the Beijing Traffic Management Bureau, with 140 traffic jams that extended the city's rush hour by an hour. In August, a traffic jam that clogged a highway north of Beijing for 10 days and stretched for as long as 100 kilometers made headlines around the world.

Under the plan announced Thursday, Beijing will increase parking fees in the city and reduce them in rural areas, discouraging drivers from parking within the city. Individual car users will account for 88% of the 2011 license plate quota.

Beijing's move will add to worries that China's red-hot auto market is set to slow significantly next year. Executives from top car manufacturers have said in recent weeks they expect China's national auto sales growth to slow to around 10% in 2011, from over 30% this year and nearly 50% in 2009. The expected slowdown is due in part to new traffic restrictions but also to an anticipated increase in the vehicle ownership tax and the expiration of subsidies for purchases of small, fuel-efficient cars.‹

[DewDiligence]

High-Speed Rail Poised to Alter China

http://www.nytimes.com/2011/06/23/business/global/23rail.html

›June 23, 2011
By KEITH BRADSHER

CHANGSHA, China — Even as China prepares to open bullet train service from Beijing to Shanghai by July 1, this nation’s steadily expanding high-speed rail network is being pilloried on a scale rare among Chinese citizens and news media.

Complaints include the system’s high costs and pricey fares, the quality of construction and the allegation of self-dealing by a rail minister who was fired earlier this year on corruption grounds.

But often overlooked, amid all the controversy, are the very real economic benefits that the world’s most advanced fast rail system is bringing to China — and the competitive challenges it poses for the United States and Europe.

Just as building the interstate highway system a half-century ago made modern, national commerce more feasible in the United States, China’s ambitious rail rollout is helping integrate the economy of this sprawling, populous nation — though on a much faster construction timetable and at significantly higher travel speeds than anything envisioned by the Eisenhower administration.

Work crews of as many as 100,000 people per line have built about half of the 10,000-mile network in just six years, in many cases ahead of schedule — including the Beijing-to-Shanghai line that was not originally expected to open until next year. The entire system is on course to be completed by 2020.

For the United States and Europe, the implications go beyond marveling at the pace of Communist-style civil engineering. China’s manufacturing might and global export machine are likely to grow more powerful as 200-mile-an-hour trains link cities and provinces that were previously as much as 24 hours by road or rail from the entrepreneurial seacoast.

Zhen Qinan, a founder of the stock exchange in coastal Shenzhen and the recently retired chief executive of ZK Energy, a wind turbine producer in Changsha, said that high-speed trains were making it more convenient to base businesses here in Hunan Province. Populous Hunan has long provided labor to the factories of the east, but its mountains have tended to isolate it from the economic mainstream.

Mr. Zhen ticked off Hunan’s attributes: “Land is much cheaper. Electricity is cheaper. Labor is cheaper.”

Around China, real estate prices and investment have surged in the more than 200 inland cities that have already been connected by high-speed rail in the last three years. Businesses are flocking to these cities, now just a few hours by bullet train from China’s busiest and most international metropolises.

Meanwhile, a shift in passenger traffic to the new high-speed rail routes has freed up congested older rail lines for freight. That has allowed coal mines and shippers to switch to cheaper rail transport from costly trucks for heavy cargos.

Because of this shift, plus the construction of additional freight lines, the tonnage hauled by China’s rail system increased in 2010 by an amount equaling the entire freight carried last year by the combined rail systems of Britain, France, Germany and Poland, according to the World Bank.

The bullet train bonanza, and the competitive challenge it poses for the West, is only likely to increase with the opening of the 820-mile Beijing-to-Shanghai line, which will create a business corridor between China’s two most dynamic cities. The railway ministry plans 90 bullet trains a day in each direction. [This makes Amtrak’s Boston-Washington Acela seem like a toy service by comparison.]

The trains will barrel along at initial speeds of 190 miles per hour, with plans to accelerate to 220 miles per hour by the summer of 2012, if the first year of operation goes smoothly.

Even at the initial speeds, they will take less than five hours to cover a distance comparable to New York to Atlanta — which requires nearly 18 hours on Amtrak.

China’s huge investment in high-speed rail may be instructive to the United States, whether for proponents of federal rail investments or critics who consider bullet trains a boondoggle.

President Obama, who has proposed spending $53 billion on high-speed rail over the next six years, faced a setback in his budget deal in April with Congressional Republicans, who eliminated money for that plan this year.

Last fall, newly elected Republican governors in Florida, Ohio and Wisconsin turned down federal money their Democratic predecessors had won for new rail routes, worrying that their states could cover most of the costs for trains that would draw few riders.

But then, high-speed rail is not universally acclaimed in China, either. Financial regulators in Beijing have cautioned banks to monitor their rising exposure from hefty loans to the rail ministry. To pay for rapid deployment of the high-speed system, the ministry has borrowed more than $300 billion. It plans to invest an additional $115 billion this year, despite running losses on existing operations that it attributes mainly to rising diesel fuel costs for older lines, as well as rising interest payments.

Among the biggest beneficiaries of the high-speed rail system are firms that contribute nothing to defray its costs. Those would be freight shippers, which now have more exclusive use of the older rail lines, with fewer delays.

On the older tracks, the rail ministry has long been able to dictate that freight rates would subsidize passenger trains because the ministry owns those older tracks outright. The new, high-speed lines — passenger trains only — are owned by joint ventures between the rail ministry and provincial governments. That has prevented the ministry from forcing freight shippers to cross-subsidize the new high-speed services. As a result, passengers must pay much higher fares on the new trains than on the older ones.

The lack of freight subsidies is also causing concern in the rail and banking industries that the debt agreements of some joint ventures might need to be revised to extend the repayment of investment costs over more years.

For ordinary citizens, meanwhile, the steep prices for high-speed train tickets have touched China’s raw nerve of rising income inequality.

“The government is just abusing the money of the common people,” said one posting on an Internet discussion forum, defying the network’s censorship.

From Changsha to Guangzhou, the one-way fare in economy class for the two-hour journey, at speeds of up to 210 miles per hour, is 333 renminbi ($51). That is comparable to a deeply discounted airfare, but expensive for a migrant worker from Hunan who might earn only $160 to $400 a month in wages in Guangzhou.

The same trip takes nine hours on an older, diesel train. But it costs only 99 renminbi ($15).

Chinese and foreign engineers have questioned the long-term strength of the concrete used in bridges and viaducts under contracts awarded during the term of the disgraced former rail minister, Liu Zhijun.

The rail ministry’s new leaders, brought in after the corruption investigation, contend that safety concerns are misplaced. But they have responded to public anger over fares by announcing plans to lower the top speed on many routes on July 1 — which will not only address safety questions but will sharply reduce the amount of electricity consumed — and pass on the savings through reduced fares.

When the Beijing-to-Shanghai line opens, it will create a north-to-south artery with links to east-to-west rail lines at two dozen stations along the way.

“It’s the network together that makes it work — knowing you can go from Shijiazhuang to Beijing and then transfer to Tianjin, so the coal guys can go to the port and conduct business with their shippers, for example,” said John Scales, a rail expert in the Beijing office of the World Bank who has advised China.

Already, the longer routes elsewhere appear to draw much heavier ridership. The trains, which typically carry 600 passengers, sometimes sell out despite departures every 10 or 15 minutes, particularly on Fridays but sometimes even at lunchtime in the middle of the week.

Of course, high speed is relative. First, a passenger must actually get a seat.

Zhou Junde, a migrant construction worker with a large red and green tattoo of a hawk on the right side of his neck, stood in line here at the Changsha station on a recent Friday afternoon to buy a high-speed ticket to Guangzhou. But the next high-speed train was sold out, and so was the next one 10 minutes after that. He would have to wait 30 minutes to board a train with a seat.

“Sometimes,” he said, “I come several hours early to get the departure I want.”‹

[DewDiligence]

Factoid: China’s auto industry produces about 17M vehicles per year, up from fewer than 2M vehicles ten years ago. (Source: http://www.nytimes.com/2011/09/05/business/global/china-changes-direction-on-car-sales.html )

[DewDiligence]

Traffic Jam and Smog in Bejing



This photo is circa 2008; it’s probably worse today.

[DewDiligence]

Russia needs better infrastructure, evidently:

http://www.nytimes.com/2012/12/04/world/europe/russian-traffic-jam-strands-drivers-for-3-days.html

The…traffic jam—100 miles long by some estimates and involving 10,000 vehicles—trapped some motorists for three days and forced senior Russian officials to go on television on Monday to mollify the thousands of angry drivers.

…Years of underinvestment on Soviet-era infrastructure have left the M10, rarely free of traffic jams on the best of days, prone to nasty bottlenecks in several small towns that lack bypasses. “I left St. Petersburg on Friday and in three days have traveled around 200 kilometers,” or about 124 miles, one driver said on the radio station Kommersant-FM on Sunday evening.

Also see #msg-53690679 about a colossal traffic jam in China during 2010.