Research On The Financial Investment In The PPP Mode Of Beijing Rail Transit

Subway plays an important role in the development of public transport in Beijing.As of the end of 2016,Beijing has operated 18 lines,operating mileage of 527 kilometers,the average daily passenger volume of subway has over 10 million people,conditional on three rings,four horizontal,five vertical and seven radiation rail transport network.At the same time,Beijing subway owed a large number of government debt,causing great pressure on the Beijing local finance resources.As of the end of 2016,Beijing Subway Investment Company owed government debt more then 1918 billion yuan,accounting for the size of Beijing whole government debt 25.1%,accounting for 48.3% of the city whole debt.Rapid urbanization development has a strong demand for metro rail traffic equipment,but the government is facing increasing financial burden.The government alone can not support more than 1,000 kilometers of beijing subway projection during the 13 th Five-Year Plan period.At present,most of Beijing Subway Network(BNS)have not adopted PPP mode,only lines 4,16 and 14 operated by Beijing-Hong Kong Metro Company adopted the PPP mode,which has good economic benefits and significantly reduced fiscal expenditure.In order to solve the problem of excessive investment in BNS,more and more lines will adopt PPP mode.This paper focuses on two major issues of government investment of BNS under PPP mode: construction investment and subsidies for operation.Firstly,this paper reveals the role of government expenditure in the construction and operation of BNS under PPP mode.Based on information economics and mechanism design theory,this paper establishes a two-stage theoretical model for the construction and operation of BNS,and analyzes the relationship between public investment,subsidies and private capital investment,return rate of public projects.The relationship highlights the government’s role to induce private capital.If government more investment can induce private investment more.Government expenditure not only reflects the characteristics of BNS as “quasi-public goods”,but also provides incentives for private capital investment.Government investment main role is to overcome moral hazard problems that are common in the construction and operation of BNS.However,under PPP mode it does not abandon government spending,but minimizes government spending.It is not feasible to completely rely on private investment.Secondly;the paper describes the characteristics of revenue and cost growth and the financial pressures it faces in the construction and operation of BNS.It analyzes the impact of PPP mode on BNS fiscal expenditure and the government’s roles and risks.Then,in view of excessive subsidies during the operation of BNS,this paper uses the panel data econometric model to improve subsidy method.Based on the estimation of BNS revenue and cost function,it analyzes the sensitivity of revenue and cost factors,and proposes a new method to calculate subsidies for every lines.Finally,based on the theory model and data explanation,this paper puts forward some relevant recommendations for BNS PPP future development.The contents of this paper are as follows:Chapter 1 is the introduction,which introduces the research background and meanings of this paper,the important concepts,research ideas,methods and paper structure,as well as the possible innovations of the article.Chapter 2 is literature review,from the nature of PPP,its origin and operation form,the operational risk of PPP mode,government responsibility and efficiency of fiscal input under PPP mode,the PPP experience of government etc.There are few theoretical studies on the government investment for subway under PPP mode,this paper will contribute this topic.Chapter 3 using the economic theory of information economics and mechanism design,this paper analyzes the information asymmetry problem in the two stages of the construction and operation of the PPP project in BNS.The government and the private sector investment share,the final investment return and the government’s financial subsidies,to maximize the social welfare.The theoretical model points out the dual effect of moral hazard on government and private capital.The mechanism design theory ensures that government and private capital are successfully constructed and operated PPP project.The government subsidy is to ensure that the government overcomes its own moral hazard and induces private capital to participate in PPP project.The government is to provide a financial basis for the subway construction.Chapter 4 describes cost and income situation of BNS by time series data from 2010 to 2015,as well as Beijing fiscal statistic.It is under severe financial pressure for BNS.Before 2006,the passenger volume of BNS was stable,but by 2016 it has exceeded 35 trillion passengers.BNS accounts for 1/6 of the whole passenger’s volume.Overall,the transport capacity of BNS is about twice national average.Traffic volume of BNS is about 8 times that of the whole country.The number of vehicles is about three times the national average.On the one hand,whole investment of BNS has grown nearly 9 times in 15 years,and fixed asset investment has remained between 30 billion yuan and 50 billion yuan in recent years.BNS total investment has exceeded 279.4 billion yuan by 2017.The average cost is 471 million yuan per kilometer.The highest cost is close to 1 billion yuan per kilometer,which is the same as that of many developed countries.Far higher than some developing countries such as Mexico and South Korea.On the other hand,the gap between revenue and cost has widened.Every year,the operating cost per line is about 160,200 yuan.According to firm’s data,the average growth rate of cost increased between 4.24% and 6.21%,while revenue growth was just 3.58%,other source income fluctuates greatly and the amount is small.The comprehensive cost of BNS will increase by 69%,while the comprehensive income will increase by only 25%.The gap will require government subsidies.According to government statistic,the average subsidy for each line is about 170 million yuan every year,and total subsidy for all lines is about 3.1 billion yuan,which does not include equipment renovation.Subsidies and fixed assets renewal subsidies.Beijing transportation cost accounts for a large proportion of Beijing’s public expenditure.The total fiscal expenditure of BNS is between 30 billion and 50 billion yuan each year,about 10% of Beijing’s fiscal revenue,up to 15%.BNS operation subsidies account for about 50% of transportation expenses,and almost half of transportation expenditure.However,subsidies have not played its role.The asset return rate of BNS or the return on capital is at a low or even negative level,which will continue to affect development of other public transport modes.Chapter 5 analyzes the impact of PPP on public finance of Beijing,and analyzes the main roles and risks of public finance of Beijing under the PPP mode.At present,Line 4,Line 16 and Line 14 are operated by PPP mode,and other lines are operated by a state-owned company.Portion of PPP of BNS is divided by 7:3,70% is funded by government,and 30% is operated by private capital.Beijing-Hong Kong Subway Company behaviors well.After adjusted by the passenger volume,Beijing-Hong Kong Subway Company is better than Beijing Subway Company from labor cost,power consumption,total cost.The cost of Beijing Subway Company is 6.71 yuan/person,while the cost of Beijing-Hong Kong Subway Company is 5.91 yuan/person.Besides that,the overall operation efficiency of Beijing-Hong Kong Subway Company is better than that of the Beijing subway company.Beijing-Hong Kong Subway Company reduced government investment.On average,it saved 41% of the fiscal investment.If the remaining lines are all under PPP mode,the amount of expenditure saved will be 70-800 billion yuan each year.From 2010 to 2017,the adoption of PPP mode can save government funds of 84.9 billion yuan,which can effectively reduce government debt.After adjusted by the passenger volume,Beijing-Hong Kong subway company’s subsidies continued to decline,while the Beijing Metro company’s subsidies barely changed.If advertising revenue and other income are further included in the calculation,then the overall government expenditure are even lower.Since BNS command center has no income,it is especially important to reduce the operating cost of BNS by PPP.The Beijing Municipal Government and its fiscal input are at the core of BNS good performance.It cannot rely solely on private capital.Fiscal input can also provide key guarantees for PPP financing and as the ultimate risk taker for BNS.At the same time,information asymmetry between the government and the private sector is widespread.The government has taken greater risks in project financing,project design,project construction,project operation,and project exit,it need to control fare or price risks,In order to reduce all kinds of risks,the Beijing Municipal Government should strengthen the risk management awareness,organize professional teams,and coordinate all branches of government.Chapter 6 has improved the government subsidy accounting method.At present,Beijing municipal government subsidies only depend on actual passenger flow and shadow costs of fare.The traditional cost subsidy method is easy to cause enterprises to incur cost,especially the omission of important macro information,lack of micro-operation data of firms,sensitivity analysis of cost and income function,volatility of government subsidies and lack of supervision,making traditional cost method need to improve.This chapter adopts panel data econometric method to improve subsidy method,comprehensively utilize revenue and cost information,and external factors such as macroeconomic conditions to analyze the sensitivity.Traffic revenue and cost functions are more accurately defined.Based on the panel data from 2010 to 2016,the estimation results show that the average daily passenger flow,the number of vehicles operated,and the average transportation distance determine revenue,while energy consumption per 100 kilometers have an important impact on operating costs.Other source revenue is affected by the number of trains,the number of interchange stations,and the number of electric buses.Cost and income function estimates make further government subsidy calculations more scientific.The procure of subsidies for BNS as follows: first collect micro data and external macro data of all lines,establish panel data econometric model,estimate the income function and income function of all lines;secondly,bring each line variables into cost and income function and government determines the amount of subsidies according to the difference.Finally,the government monitors the overall cost and income of each line,and supervises the operation of each line.Chapter 7 gives policy recommendations for the government investment and management measures under the PPP mode.