World Bank Calls for Greater Role of China's Central Government in Urban Transport

June 14, 2006

BEIJING, June 14, 2006 – With more and more cars running on the streets, large cities in China are increasingly suffering from traffic jams and choking air.  Other related problems have also emerged.  Motorization drives urban sprawl and results in excessive farmland conversion.  To build more roads, municipal governments rely heavily on off-budget financing and as a consequence bear heavy financial liabilities.  The impacts of rapid motorization on energy security, fuel prices, and green house gas effect are not only a national but also an international concern.  To deal with these problems effectively, the Chinese central government needs to re-define and strengthen its role in urban transport, according to a World Bank study released today. 


Building Institutions for Sustainable Urban Transport examines the changing nature of urban transport problems and the associated institutional issues in a broad context of urbanization and fiscal decentralization.  The report concludes that various institutional weaknesses are at the core of urban transport problems in China. 


"The Chinese experience is unique.  Few countries have experienced the kind of extraordinarily rapid pace of motorization seen in China.  No other country has ever in history seen the shift of 300-400 million people from rural to urban life within just one generation," said Liu Zhi, World Bank Senior Infrastructure Specialist and one of the two main authors of the report.  "More importantly, the rapid motorization coincides with the crucial period of China's decentralization that devolves a range of functional and fiscal responsibilities from the national to local governments." 


The municipal governments assume primary responsibilities—both functional and fiscal—for urban transport.  Most of them are able to mobilize resources to expand the capacity of transport infrastructure.  The amounts of road investment over a short period of time are unmatched by most developing cities around the world.  However, heavy investment generally fails to yield sustainable outcomes. 


Knowledge about sustainable urban transport is available in China.  Sustainability is always emphasized in government policy.  However, as the report points out, various institutional weaknesses are main barriers for knowledge and policy to be translated into effective actions. 


For many years until recently, many cities accorded priority to GDP growth over more balanced, sustainable development.  At the practical level, the urban master plan is inherently rigid and allows little flexibility required for meeting the rapidly growing demand for urban transport services.  On the other hand, it is de-linked with the city's financing plan, and thus is difficult to implement.  The situation is further complicated by lack of sustainable municipal financing mechanisms.  Cities have to rely on whatever means are available today to deal with their pressing needs, often at the cost of the public's long-term interest.  Unfortunately, the checks and balances mechanisms have not been fully in place to ensure appropriate procedures for municipal decisions to take into consideration the interest of the majority of the urban residents. 


"The challenge ahead is enormous for both central and local governments.  The primary driving force behind motorization - the growth of household incomes - is expected to remain strong in urban China," said Graham Smith, World Bank Coordinator for the Transport Sector in China and the other main author of the report.  The good news is that technological solutions exist for urban transport outcomes that are more sustainable.  As recent studies demonstrate, a mix of policies and technologies could help cities bring under control the overall magnitude of fuel consumption and green house gas emissions.  These include energy-efficient vehicle technologies, clean fuels, compact city development, better public transport services, and higher taxation on fuels. 


To make these happen, strong supporting institutions matter the most.  The report recommends six specific actions: 


  • The national government should strengthen its role in urban transport, to provide policy directions and reward good practices. 
  • The incentive structure of the municipal governments should be improved to ensure due attention to environmental quality, urban livability and local capacity building.  The local People's Congress should strengthen its role in monitoring the performance of the municipal government, and in representing the long-term interest of the urban residents in the decision making and policy implementation process. 
  • The urban planning process should be reformed so as to ensure that long-term urban land use/transport strategic planning is part of the urban planning process and interactive with urban master planning. 
  • A clear link between urban transport planning and financing should be established, through the adoption of capital improvement plans and multi-year financial plans. 
  • Sustainable and transparent financing mechanisms should be developed, to correct wrong incentives and enhance risk management. 
  • A healthy and efficient public transport industry should be developed through industry-level reform.  This is central to enhancing urban travel mobility.

Finally, the report highlights the potential role of the World Bank as a development partner with the central and local governments in promoting China's agenda for urban transport sustainability. 

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