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China Gerts Worlds Largest Traffic Jam, Just a Brief Bottleneck on the Road to Growth

Economics / China Economy Aug 26, 2010 - 07:38 AM GMT

By: Money_Morning

Economics

Best Financial Markets Analysis ArticleDon Miller writes: Besides recently being crowned the world's second-largest economy, China now has the dubious distinction of spawning the world's longest traffic jam. And it's all directly attributable to China's voracious appetite for energy and automobiles.




A line of cars and trucks 60 miles long (100 kilometers) has snarled the road along the Beijing-Tibet 110 Expressway for the past nine days.

The bumper-to-bumper gridlock, which finally began to ease yesterday (Wednesday), was created by a surge in trucks carrying coal from the province of Inner Mongolia to the suburbs of Beijing, where power plants continue to suck up and incinerate millions of tons of the black rock.

Chinese demand for coal to produce electricity for the world's fastest-growing major economy continues to accelerate. Electricity demand in China grew 22% in the first half from a year earlier as economic growth rebounded to 10.3% in the second quarter and 11.9% in the first three months of 2010.

Despite all its efforts to clean up its air with solar and wind power, China still relies on coal for 70% of its energy demands. And most of that coal must travel on roads connecting mines in the nation's hinterland to its eastern ports.

Inner Mongolia passed Shanxi province last year to become China's biggest coal supplier after the government closed mines on safety concerns following a series of deadly accidents in Shanxi.

A shortage of railway capacity connecting Inner Mongolia to port cities such as Caofeidian, Qinhuangdao and Tianjin, where coal is shipped to power plants in southern China, has forced suppliers to rely on trucks to feed the power plants around Beijing. Since Aug. 14, China's 110 highway has been big parking lot. The extreme congestion on the road is a result of maintenance work, necessitated by overloaded coal trucks that have damaged the pavement, officials said.

The pile-up of trucks brought traffic into China's capital to a grinding halt and raised questions about whether its infrastructure is adequate for handling the growing number of cars and trucks that are added to its streets every year.

China, with its fast-expanding middle-class, overtook the United States to become the world's biggest car market in 2009.

The value of the gross output of China's auto industry surged 49% in the first half of this year to $308 billion (2.086 trillion yuan), officials at the Ministry of Industry and Information Technology (MIIT) said Monday.

From January to July, China's auto output and sales both exceeded 10 million units.
In July, China's auto output stood at 1.29 million units, up 16% year-over-year, while sales stood at 1.24 million units, up 15% year on year, MIIT said.

The Chinese government in June decided to extend by six months its own version of the U.S. "Cash for Clunkers" auto replacement program. By the end of May, the Chinese government had handed out $253 million (1.7 billion yuan) in subsidies for 127,000 trade-in vehicles.

And China's drivers, almost 50% of whom received their permits in the past five years, are clogging the streets like never before.

In Beijing alone, a city of 20 million, the total number of vehicles is expected to hit 7 million by 2015. The number of vehicles in Beijing has increased by 1,900 a day on average in the first six months of this year, officials said at a recent transportation seminar.

"We're making another Great Wall, it's just that this one is made of cars," Gan, a taxi driver complained to The Hindu during a traffic jam on the East Third Ring Road. Even though the city has invested heavily on widening roads and expanding its subway system, it still struggles to keep pace with the surge of new vehicles.

To ease the burden on the roads, the government is planning to invest $49.4 billion (331.2 billion yuan) in the next five years to expand its subway system by 510 miles (850 kilometers) and increase the use of public transport to 40%.

But no matter how much money the government pours into Beijing's streets, it's unlikely to have much effect on the gridlock clogging the 110. China needs more coal to stoke the fires of its economy, and right now at least, the road is the best option.

And based on the country's red-hot economic growth, China's newly minted drivers can expect more of the same, if not worse, for years to come.

"The situation may ease in three or four years, when rail capacity from Inner Mongolia to Caofeidian gets upgraded and the new rail line to Liaoning province starts," David Fang, a director at the China Coal Transport and Distribution Association, told Bloomberg News.

Source : http://moneymorning.com/2010/08/26/russia-2/

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