Metro Project Financing

With the acceleration of the process of urbanization in China, urban traffic congestion problems have been increasingly severe. As an effective way to solve urban traffic problems, subway has the advantages such as space-saving, big volume, safety, timely, environmental protection and so on. Meanwhile, subway can simultaneously lead rising value in the city land and rapidly promote the formation of regional function circles such as housing, trade, culture and so on. However, the high cost often restricts the development of the subway. Moreover, the subway can't attract enough social capital because of the long period of investment recovery, the long construction period, weak project profitability, difficulty operation and so on, which increases the difficulty of financing. With the outstanding contradiction of increasing demand of subway construction and the problem of financing, we must reform our current investment and financing mechanisms. Under such situations, the author thinks it is very important to study the investment and finance mechanism for city government.Firstly, this paper simply introduces the background of subway industry. Combining with the economic characteristics of subway infrastructure in China, it analyses the necessity of subway construction and the problems existing in subway's development.Secondly, the basic theories of project financing are introduced, including the definition and characteristics of project financing, project distinguish theory, project financing structure and metro project financing of stakeholders. And then the status of Metro financing in China are summarized and the reasons for the current situation are given. Next, the design principles, the operational procedures of metro project financing, their properties and application ranges are analyzed.Thirdly, according to the theories of investment and finance above and the successful subway construction experiences from home and abroad, the proposal "government-led, diversified investment, market operation" is provided, which includes reform and improve the subway investment and financing system, government's position of financing in the subway, broaden the channel of financing, the introduction of market mechanism to reduce costs, strive for support and preferential policies, achieve healthy development of subway enterprises, improve the supervision mechanism on the Metro companies and other measures.Finally, using the relevant theories of investment and financing above, we use Shenzhen Metro Line 5 as a case to demonstrate the paper's main theories and perspectives.