Debate sparked over Beijing’s proposed subway fare increase

Beijing’s subway system, one of the longest in the world, is confronted by excessive congestion and costly government subsidies. In a controversial move, the city government has decided to increase the standard subway fare, currently fixed at 2 Yuan (USD $0.33) per trip. If the proposal survives an upcoming public hearing, Beijing will join the ranks of cities like São Paulo, Brazil and Mexico City, Mexico in raising fares for public transport.

A heaping of public outcry regarding the fare increase and the subway system’s poor service has erupted since the government’s announcement, but EMBARQ China has argued that two crucial questions should be considered before passing judgment on the proposal: Why would the city have to raise subway fares? And will the fare raise be sufficient enough to salvage the poorly-operated and financially distressed subway system?

Beijing subway fare increase is economically and socially justified

Up until now, Beijing’s heavy government subsidies for mass transport systems like the subway have been justified on the grounds of public equity and social benefits – affordable public transport systems discourage private vehicle usage and reduce external costs from traffic congestion and air pollution. But the social benefits that could have been gleaned from subsidies have been eroded by the Beijing subway’s poor quality of service. Crowding and unreliability dissuade people from forgoing private cars and taxis in favor of riding the subway. In fact, the share of trips made by automobiles in the city has risen from 23% to 33% since the beginning of Beijing’s subway boom. Subway ridership increase during the same period is partly attributable to the sharp decline in the number of people who cycle – down from 50% in 2002 to 15% in 2011.

Furthermore, the system’s low fares create a tax burden for citizens across socioeconomic statuses in order to fill operation deficits. Considering that the bulk of the peak-hour riders are middle-class workers, the current fare structure subsidizes their expenses unnecessarily, depleting public spending that could otherwise go towards healthcare, pensions, or education. With Beijing’s standard subway fare currently too low to reap the equity and social benefits it is intended to generate, a reasonable fare increase is justified in order to improve the quality of urban transport in the city.

Complementary measures must accompany fare increase

Raising Beijing’s subway fare may deliver improvement to a degree, but simple number crunching and lessons from other cities indicate that fare increases alone are not enough to generate tangible and enduring changes. Therefore, the following complementary measures should be considered in Beijing:

Diversified transport services

The peril of the Beijing subway’s overcrowding lies in the lack of viable transport alternatives. In contrast to the packed subway, the city’s buses still have surplus supply. Unfortunately, a lack of exclusive bus lanes and the unreliability of ground transport make it a weak rival to the subway, despite the latter system’s flaws. Ultimately, the city cannot operate on a subway alone; Beijing requires a network of differentiated transport services with varied level of services and fare structures that carter to the travel demands of different user groups – from permanent residents to tourists, seniors to children, private car owners to dedicated public transport passengers, and more.

Innovative revenue options

The daunting public subsidies associated with subways in Beijing and elsewhere also raise the question as to whether the municipal government should rely solely on subway fares for revenue. Compared to cities like Hong Kong, Tokyo, and Singapore, Beijing limits its revenue sources by not tapping into the business opportunities offered by its daily ridership of over 10 million passengers. Enabled by the “Rail + Property” model, Hong Kong and Tokyo pull from the property value and sale increases at nearby subway stations in order to finance their operation. With such diversified and innovative funding measures, the subway operators not only keep their fare rate relatively affordable, they also can operate financially independent of municipal or federal governments.

Building a more sophisticated fare system for Beijing’s transport network

Beijing’s proposed variable ticket pricing is a laudable step toward a more sophisticated fare structure that will help the Beijing rationalize subway ridership, maintain social equity, and raise revenue. Such a system will help achieve fare integration across different modes of transport, streamline connections between various modes, and offer appropriate transfer policy, multi-ride discounts, multi-day tourism passes, or even company transport subsidy schemes. In the face of public opposition to the proposed fare increases, public campaigning and strategic communication is a crucial component of educating users that their money would be well spent, contributing to an integrated, higher-quality, and more user-oriented transport network.

To read more of EMBARQ China’s analysis of the proposed subway fare increase in Beijing, see EMBARQ China Research Assistant Lulu Xue’s recent blog posts on TheCityFix – “Beijing’s subway fare increase, justified” and “Will raising Beijing’s subway fare be enough to improve service quality and combat mounting subsidies?”