Profit Model of Metro Enterprises and Quasi-Market Based Practice of Shenzhen Metro

Abstract

The need to financially support metro enterprises stems from the amplified global enthusiasm for sustainable modes of transport. This paper analyzes the formulation and practice of the profit model based on quasi-marketing initiated within Shenzhen Metro in China. In contrast to previous studies based on a single theory, this paper employs an integrated approach in optimizing gains. Metro enterprises have peculiar attributes such as supply of quasi-public service products, positive externalities, heavy assets, low profit, economy of scale, and economy of scope. Therefore, in order to effectuate sustainable growth, the author has put forward three methods for the profit model based on the quasi-market principle: firstly, generate internal gains of positive externalities through the enterprise’s market operation on government-allocated resources; secondly, balance cost and income by modifying the accounting policies on fixed assets depreciation and financing interest; and lastly, maximize economy of scope by enhancing synergy between different business segments and sub-businesses of the same segment in the enterprise. In practice, these methods are carried out in Shenzhen Metro with innovative methods that comprise “metro plus property”, “member plus fund” and “entity plus virtual”. This study concludes that the advantages of quasi-marketing include the optimization of resources and the success in overcoming the financial restraints in metro enterprises. Through the high applicability in Shenzhen Metro, it is shown that this quasi-market principle-based profit model could enable metro enterprises to achieve self-development and sustainability.

Keywords

Metro / Quasi-market / Profit model / Cost and benefit / Economy of scale / Economy of scope / Self-development sustainability

References

[1] Mu R, De Jong M, Koppenjan J. The rise and fall of Public–Private Partnerships in China: a path-dependent approach. J Transp Geogr, 2011, 19(4): 794-806

[2] Groenleer M, Jiang T, de Jong M, de Bruijn H. Applying Western decision-making theory to the study of transport infrastructure development in China: the case of the Harbin metro. Policy Soc, 2012, 31(1): 73-85

[3] Ke Y, Hao W, Ding H, Wang Y. Factors influencing the private involvement in urban rail public-private partnership projects in China. Constr Econ Build, 2017, 17(1): 90-106

[4] Mathur S, Smith A. Land value capture to fund public transportation infrastructure: examination of joint development projects’ revenue yield and stability. Transp Policy, 2013, 30: 327-335

[5] Miao QH, He XZ, Fei FY. Discussion about externality and profit model of urban rail transit. Urban Mass Transit, 2004, 5(9–11): 14

[6] Zhang H, Liu Y, Xie JG. Research on profit model of urban rail transit based on sustainable development. Urban Rapid Rail Transit, 2007, 5: 9-13.

[7] Zhang XL, Zhang H, Liu Y. The connotation and operation of profit model “Metro operation + property development”. Urban Rapid Rail Transit, 2008, 2: 1-6.

[8] Liu PZ. Rail transit development model based on profit. Ningbo Econ (Sanjiang BBS), 2012, 12: 22-24.

[9] Xue L, Yang YT, Jiang DB. Discussion about profit model of integration development of rail transit and land. Urban Rapid Rail Transit, 2011, 5: 14-17.

[10] Song XM, Wang XC. Research on profit model of urban rail transit in China. Urban Mass Transit, 2009, 10: 10-12.

[11] Xu G (2009) Research on Hong Kong metro profit model. Dissertation, Southwestern University of Finance and Economics

[12] Shi JN. Analysis of the positive externalities for Hong Kong metro profit model. Railw Transp Econ, 2011, 6: 81-85.

[13] Liu JL, Zeng XG. Discussion about urban rail transit construction financing and profit development. Urban Mass Transit, 2004, 4: 17-21.

[14] Qin CB (2004) Profit model analysis and research on relevant policies of Nanjing metro company. Dissertation, Southeast University

[15] Wang H. Research on how to construct urban rail transit profit model. Urban Rapid Rail Transit, 2005, 6: 1-4.

[16] Yuan CS (2005) Research on profit model of Tianjin metro. Dissertation, Nankai University

[17] Doll CNH, Balaban O. A methodology for evaluating environmental co-benefits in the transport sector: application to the Delhi metro. J Clean Prod, 2013, 58: 61-73

[18] Börjesson M, Jonsson RD, Lundberg M. An ex-post CBA for the Stockholm Metro. Transp Res Part A, 2014, 70: 135-148.

[19] Zheng C. Financing new metros—The Beijing metro financing sustainability study. Transp Policy, 2014, 32: 148-155

[20] Kamruzzaman M, Baker D, Washington S Advance transit oriented development typology: case study in Brisbane, Australia. J Transp Geogr, 2014, 34(2): 54-70

[21] Nasri A, Zhang L. The analysis of transit-oriented development (TOD) in Washington, D.C. and Baltimore metropolitan areas. Transp Policy, 2014, 32(1): 172-179

[22] Xu T, Zhang M, Aditjandra PT. The impact of urban rail transit on commercial property value: new evidence from Wuhan, China. Transp Res Part A Policy Pract, 2016, 91: 223-235

[23] Sun Y, Guo Q, Schonfeld P Implications of the cost of public funds in public transit subsidization and regulation. Transp Res Part A Policy Pract, 2016, 91: 236-250

[24] Ye XF, Hu ZH, Gu BN. Construction financing model and successful experiences of Japanese urban rail transit. China Railw Sci, 2002, 4: 128-133.

[25] Wei W, Zhu WX. Find business model, 2009, Beijing: China Machine Press

[26] Lin GP, Wei W, Zhu WX. Dialysis profit model- theoretic elongation of Wei-Zhu business model, 2014, Beijing: China Machine Press

[27] Wei W, Zhu WX, Lin GP. The economic interpretation of business model II, 2015, Beijing: China Machine Press

[28] Samuelson PA. The pure theory of public expenditure. Rev Econ Stat, 1954, 36(4): 387-389

[29] Buchanan JM, Stubblebine WC. Externality. Economic, 1962, 29(116): 371-384.

[30] Pigou AC. Welfare economics, 2006, Beijing: Commercial Press

[31] Coase RJ. The problem of social cost. JL & EcoN, 1960, 3: 1

[32] Zhang H, Ding XH. Urban rail enterprise assets depreciation and financing interest accounting treatment based on full life circle. Urban Rapid Rail Transit, 2013, 26(04): 47-51.

[33] Zhang XL, Lin MD, Zhang H. Research on urban rail transit economic, 2010, Beijing: China Economic Publishing House