PPP

Your Page: Home > PPP > Projects > Feature Projects in China

Shenzhen Metro Line 4

LOCATION
Shenzhen, Guangdong Province, China
OWNER/IMPLEMENTATION UNIT

Hong Kong’s Metro Transit Railway Corporation(MTR)

Shenzhen Municipal Government

MTR Shenzhen Corporation

KEY WORDS
Metro line; Shenzhen; Public-Private Partnership (PPP)
PROJECT COMPLETION/EXPECTED COMPLETION DATE
2011
CASE DESCRIPTION

Shenzhen’s Metro Line 4 connects several key downtown areas with Futian Port station, which is a major border crossing to Hong Kong. This line is also known as the Longhua Line and is a central component of the city’s public transportation system. Line 4 is the first large-scale infrastructure project implemented collaboratively by Shenzhen and Hong Kong since the formal implementation of the Closer Economic Partnership Agreement (CEPA).

A public-private partnership (PPP) model was implemented to build and operate Line 4. Hong Kong’s Metro Transit Railway Corporation (MTR) built the line and will operate, maintain, and manage the line under the supervision of the Shenzhen Municipal Government for 30 years. MTR invested a total of 5.8 billion RMB, including registered capital of 2.32 billion. In return, it received commercial development rights for land along Line 4 and almost all operating revenues including tickets and other business activities. In other words, the private partner of Line 4 takes all financial rewards and risks. The Shenzhen government, which provided a non-variable subsidy of 5.2 billion RMB, has the right to supervise MTR’s construction, financing and performance.

Several key lessons are evident from this PPP project. First, delegating operations and management to a strong private sector player can reap efficiency gains. Among the metro lines in Shenzhen, Line 4 has the most frequent train arrivals, the second largest passenger volume per kilometer, and the highest utilization efficiency of trains. Second, the public partner can delegate almost all financial risks and rewards to the private partner in metro line construction. In the case of Line 4, commercial land concessions and operating revenues cover most of the operating costs. Third, lack of performance-linked subsidies linked to performance can lead to low consumer satisfaction. Despite high efficiency, Line 4 received the lowest customer satisfaction ratings partially due to overcrowding on the line. Customer satisfaction was not an important factor in the pre-agreed performance metric indices between the public and private partners. The government provided subsidies to cover construction costs but no incentives linked to performance. The government also lacked authority and mechanisms to actively initiate adjustments to the service standards.

KEY DATA
Shenzhen Rail Transit Line 4 is 20.5km in length and includes 16 stations. It has the largest daily volume of passengers in Shenzhen (500,000), the second largest passenger volume per kilometer (14,000), and the highest utilization rate of trains (100%). MTR invested 5.8 billion RMB and the Shenzhen government provided a non-variable subsidy of 5.2 billion RMB over 10 years.
PROJECT-RELATED PARTIES

 

CURRENT PROGRESS

MTR Shenzhen formally operated Phase I of Line 4 in July 2010 and Phase II in June 2011.

INNOVATION POINT

Line 4 is the first large-scale infrastructure project implemented cooperatively by Shenzhen and Hong Kong since the formal implementation of the Closer Economic Partnership Agreement (CEPA). The public partner in this project delegated almost all financial risks and rewards to the private partner, which led to higher efficiency gains.

RELATED LINKS