19 October 2018

MTRC Shenzhen finally on the right track? Maybe, maybe not

For years, commuters on Shenzhen Metro’s Longhua Line {龍華線} have been asking the same question: why can’t a world renowned metro operator known for its premium train services live up to public expectations?

The line is one of the busiest in Shenzhen’s metro network. Yet, it is served by trains with only four cars. On the morning and evening rush hour, passengers are crammed in like sardines. Calls for increased capacity have fallen on deaf ears.

But that’s hardly all there is to the problem. Service delays and disruptions — more than a dozen mishaps have occurred in the previous two years alone — are fueling public anger.

Just last week, a series of signaling failures slowed services for four straight days. This led to station shutdowns, stranding hundreds of thousands of commuters, according to media reports.

It should come as no surprise that the Longhua Line is at the bottom of the ranking of metro line performance by the Shenzhen Municipal Transport Commission (SMTC).

The Longhua Line is operated by Hong Kong’s much vaunted MTR Corp. (MTRC, 00066.HK) which has a reputation for efficient, safe and timely service.

But not in Shenzhen.

With great expectations Shenzhen invited MTRC to operate the Longhua Line through a subsidiary in 2010.

Those expectations turned to dissatisfaction after MTRC Shenzhen repeatedly failed to address public concerns about the service.

It has become so bad some Shenzhen officials are suggesting fines and penalties similar to those in Hong Kong to force the operator to comply with public demands.

SMTC deputy director Xu Zhongping {徐忠平} confirmed the city government is thinking along those lines. MTRC could be thrown out if it fails to improve the Shenzhen operation.

MTRC Shenzhen, which has been losing money, is under pressure after failing to replicate Hong Kong’s successful rail-property development model, Shenzhen Business Daily reports.

The rail operator faces a host of obstacles. One is land prices and Shenzhen’s stringent zoning regulations. Another is reluctance by city administrators to give MTRC Shenzhen exclusive development rights to prime land along the Longhua Line given that a long section of it runs through the city’s core urban areas such as Futian {福田} district.

That would mean loss of income for the municipal government from land sales.

Without the right to build homes and malls around the railways, MTRC Shenzhen has to rely on train fares for revenue, hardly enough to cover operating costs and maintenance. Add to that a heavily regulated fare adjustment regime.

And being an overseas entity, MTRC is not eligible for government subsidies and other incentives.

Still, the rail operator is undeterred.

In 2011, it snapped up a site above the Longhua Line depot for almost 2 billion yuan (US$326.3 million), ostensibly part of a plan to build a land bank big enough to pursue a railway-property development model. It took the company two years to overcome bureaucratic wrangling.

Finally, MTRC Shenzhen began construction on a massive complex, Tian Song {天頌}, on the site last year. It will be a replica of MTRC developments in Hong Kong, featuring 1,700 homes and a large shopping mall, Shenzhen Special Zone Daily reports.

Some analysts remain skeptical. After paying a hefty purchase price, MTRC Shenzhen could take long time to recoup its investment, let alone enhance its train service.

Also, winning railway sites at future auctions is far from guaranteed, forcing the company to compete with cash-rich bidders and exposing it to market risk just like the rest.

MTRC’s next project, a property development in Tianjin — where the company has bought a site but is yet to start work — is worth watching.

– Contact the writer at [email protected]


EJ Insight writer

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