China’s recent stimulus push, involving dozens of infrastructure projects and hundreds of billions of yuan, boosted stock prices around the world, bolstered confidence in the Chinese economy and took the country one giant leap further down the urbanization road. But as with most of China’s big plans, the implementation tends to be a chaotic mixture of scientific efficiency and headlong, creative destruction. Transportation in particular presents a knotted conundrum of middle class aspirations, global market forces, shady construction projects and big, black clouds of CO2.
The Volkswagen production facility in Longquan, 35 minutes southeast of Chengdu’s city center, represents the global, scientifically efficient side of China’s infrastructure boom. The facility employs nearly 7,000 workers, who, together with more than 400 robots and amazing feats of engineering like Durr’s Eco Dry Scrubber, churn out sedans for China’s car-hungry middle class. Volkswagen plans on producing 1 million automobiles a year out of Longquan, most for the southwest China market.
Sagitars are already rolling out of the facility’s doors and they will soon be joined by the new Jetta. At around 80,000 yuan, both cars target the growing middle class in southwest China. This emerging consumer wants to not only drive to work, but also take day trips out to Leshan, Ya’an and Xichang – the new nongjiale (homestay) destinations for urbanites seeking solace from the city.
Chengdu has an estimated 3 million registered vehicles and about 1,000 more are added every week. The city, including outlying districts like Dujiangyan, Dayi and Longquan, has a population of 14 million and city planners expect that number to increase to 20 million in the next 15 years. Right now 40 out of 1,000 of own a car, but that ratio is expected to grow to at least 200 per 1,000 in the next decade.
“People in Chengdu want to be mobile and value being mobile,” said Christian Koch, VW China’s executive vice-president of products and logistics. “We go where the customers are.”
One Huge Traffic Jam
China currently has an urban population of 600 million people. In 15 – 20 years, 350 million more will be added, an increase equal to the entire population of the United States. By 2030 there will be 1 billion urbanites spread out across 220 cities, each with at least 1 million in population, together accounting for almost 90% of the country’s GDP.
One of the biggest questions facing China is how to provide adequate and efficient transport for all of those urbanites. One quick look around shows that the country is going full-steam ahead with roadway, highway, railway and subway projects. Chengdu has added two Metro Lines, two high-speed rail links (and another on the way to Leshan), thousands of miles of freeway, and a host of rail links in the last 10 years. Yet the roads and rails are still jammed and the buses and subways are almost always packed.
Today Chengdu is once again a big construction site. There was a small breather for a year after the Metro Line 1 was completed, but now the entire Second Ring Road is receiving an upper deck. Construction on the ring road has made traffic almost unbearable and it will stay like this until the Fortune Global Forum next June, the deadline for construction set by the city’s authorities. The recent opening of Metro Line 2 may provide a saving grace. The line, which stretches east to west across the city, had a soft opening earlier this month and is fully operational as of
Monday, September 10th Sunday September 16th. The city plans to roll out two more lines in the next few years, but the plans also call for an elevated level for the First Ring Road. Citizens are bracing for another five years of traffic jams.
This year’s Chengdu Motor Show will attract up to 600,000 people – buyers, dealers and outright gawkers – who will check out the 420 different models on display. FAW VW already reported 1,000 orders of the new Jetta, on display at the show, and those numbers are sure to rise in the weeks ahead. As Chengdunese place orders in the largest car boom in the history of mankind, a plaintive voice of opposition makes the rounds on Sina Weibo. Entitled “Chengdunese have had enough“, the post laments a decade of traffic jams and the numbing spectre of a decade more ahead:
“10 years ago, when they started re-building the transport network, the Party and the government told us: today’s inconvenience is for tomorrow’s efficiency. We endured! 10 years of construction and traffic jams later, the Party and the government told us: the subway is on its way, the traffic jams are almost over. We endured! Construction on the metro started everywhere; roads were blocked, one couldn’t take a left anywhere and the city was riddled with one-way streets. The Party and government told us, only a few more years and it will be over. We endured!
The big boss changed and now we’re back to building again. Today I was two hours late for work and had my salary docked. Please tell me, how long must we endure this? Urgent request: Relevant organs, please start managing the city planning. Don’t build recklessly everywhere, or, as soon as someone new takes charge, start digging. You have “professional cars” and “white license plates” all we can do is endure. No more!”
A Mad Scramble For the Cash
Building a functional, modern, and sustainable transport network up from scratch is a huge undertaking. Countries with decades of experience, billions in funds and the added luxuries of low population density and manageable social pressure still consider traffic management to be one of the most complex and expensive civil engineering challenges around. China has but 20 years of practical experience, a massive population and a vocal and growing middle and upper class that wants good transportation. But they do have the cash.
Even so, one major issue impedes the efficient use of all that cash. Namely, serious inter-ministerial conflict, corruption and miscommunication. The Ministry of Railways and the Ministry of Transportation do not work that well with each other, or the half-dozen other government bodies involved in road and rail construction, such as the Public Security Bureau, the Bureau of Standards and various provincial construction and transportation bureaus. Add to that the fact that most railway construction companies also own the highway construction companies, allowing the rail people to move into road building (such as the failed venture in Poland). There is a different government body in charge of highway statistics, construction, maintenance, and planning; every single one is plagued by corrupt officials, unscrupulous contractors and a dozen internal and external factions competing for central government funds.
Worse still, much of that funding is now being handled on the local level, so corruption, incompetence, and injustice go unchecked by any form of authority. Farmers are pushed off of their lands while local officials siphon off compensation funds; contractors under-bid and then either demand more money or do a sub-par job; and ministry officials rotate in and out of office, passing the buck on to the next guy. Projects are often held hostage to the political aims of leaders out to impress someone, as may be the case with the Second Ring Road improvements, so efficiency and need take a back seat to immediate political or material gain. The general manager of an expressway construction company is a coveted position and everyone from low-level transportation officials from the townships to the provincial level construction bureaus is vying for the spot, or influence with whomever has temporarily landed it.
Yet even with all of the chaos and piracy, this movement will not stop. Urbanization is the key to transforming China into a consumer-based society and consumption means, among other things, building roads and buying cars.
An Unstoppable Force
In 1986, 28.2% of the Chinese population used public transportation, 62% rode bikes and a mere 5% drove cars. By 2009, those numbers changed to 38.9%, 18% and 34% respectively. How can China promote public transportation among the middle classes and thereby pull some percentage points away from car ownership? Massive upgrades in public transportation are big help, as are usage incentives or dis-incentives. Guangzhou and Beijing are already regulating usage and have quotas in place. Every other major city in China, including Chengdu, is mulling over similar regulations, while barreling forward with infrastructure projects to help alleviate the pressure.
And the verdict is still out on electric cars, once the anointed savior of the driving class. Although the technology for electric batteries exists – and the Chinese are some of the best in the world at making batteries – integrating new and old tech in an affordable and efficient car has so far escaped even the most advanced automobile manufacturers. No manufacturer has put together an electric car with mass appeal yet and even if they did, there is still a huge elephant lurking in the corner: even promising prototypes have to get their electricity from somewhere.
For China today, coal is the number one source of electricity production. China handles 1.5 billion tons of it annually, by far the number one producer and consumer of coal in the world. According to the International Energy Agency, “China’s share in global coal production is almost four times that of Saudi Arabia’s production of oil … (and) … China’s share in global coal consumption is more than twice that of the demand for oil in the United States.”
Even if electric cars were able to minimize exhaust, the coal China uses to power the electrical grid would more than make up for any decrease in pollution. China currently has around 70 million cars on the road and that number may increase to somewhere between 400 and 550 million by 2030. The added exhaust will pump an approximate 3 billion tons of CO2 into the atmosphere; we inject 7 billion tons into the sky today.
But even that may not be the end of China’s growth. The estimates for 2030 hover around 200 automobiles per 1,000 people (up from 40 per 1,000 today). In Europe the ratio is 400 to 1,000 and in the US it is as high as 600 to 1,000. If Chinese drive as ardently as Americans, then the world will have to answer the question: What happens when a billion Chinese drive?