Why China is Tunneling a Mind-Boggling 800 Miles in 2 Years

Why China is Tunneling a Mind-Boggling 800 Miles in 2 Years

- in Markets
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by Frank Holmes, U.S. Global Investors

Would it surprise you to discover that China is planning to add 800 miles to its subway system over the next two years? That’s the distance equivalent to building a network from Dallas to Chicago in less time than the U.S. Congress can resolve a budget!

In 2015, when the infrastructure build-out is complete, China’s subway track alone will be a mind-boggling 1,900 miles, according to JP Morgan.

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The Asian giant has been in the midst of constructing the world’s largest transportation system, laying mile after mile of high-speed rail and subway track. According to the World Metro Database, Beijing and Shanghai currently have the longest metro and subway systems, with about 275 miles each. The city of Guangzhou in China also falls in the top 10, with 144 miles of rail, beating Paris’ network length of 135 miles.

Top Cities with Longest Metro and Subway Systems

This ambitious program is part of the pragmatic solution to help 1.3 billion residents move around the country efficiently and reduce the increasing problem of air pollution due to car emissions in big cities including Beijing.

The circulating reports and photos of Beijing’s smog have recently become a dark cloud hanging over the country’s remarkable achievements, but it’s not a new issue. In the winter, smog conditions can seem much worse. Pollutants tend to linger when the air is heavier and colder compared to lighter, warmer air during the summer. In addition, the city is located near the Gobi Desert and has always been subject to sand and dirt storms, even back in the days when it was called Peking.

'Smoky Cities' Spur Policy ActionsThe U.S. experienced similar sand storms during the Dust Bowl in the 1930s, which caused catastrophic ecological and agricultural damage to the American prairies and made the economic impact of the Great Depression much worse. Sixty-five percent of the topsoil was blown away and millions of people were left homeless.

Industrialization in Beijing has certainly aggravated the matter, but Beijing is not the first city suffering from its horrible haze. The London smog of 1952 caused 12,000 total deaths, resulting in the Clean Air Act of 1956, and according to the U.S. Environmental Protection Agency, Manhattan suffered particularly poor air quality in the 1960s, affecting the eastern edge of the U.S.

Because of the government’s concerted effort to encourage consumption and help its residents achieve a higher standard of living in previous five-year plans, new cars congested the roads as fast as they were paved. Over the past decade, sales accelerated from less than 5 million vehicles in 2002 to nearly 20 million in 2012. About 114 million automobiles are now registered to Chinese residents, with ownership exceeding 1 million across 17 Chinese cities.

Growing Car Culture in China

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Frank Holmes is CEO and chief investment officer of U.S. Global Investors, Inc., and a Toronto, Canada native, which manages a diversified family of mutual funds and hedge funds specializing in natural resources, emerging markets and infrastructure. The company’s funds have earned more than two dozen Lipper Fund Awards and certificates since 2000. The Global Resources Fund (PSPFX) was Lipper’s top-performing global natural resources fund in 2010. In 2009, the World Precious Minerals Fund (UNWPX) was Lipper’s top-performing gold fund, the second time in four years for that achievement. In addition, both funds received 2007 and 2008 Lipper Fund Awards as the best overall funds in their respective categories. Mr. Holmes was 2006 mining fund manager of the year for Mining Journal, a leading publication for the global resources industry, and he is co-author of “The Goldwatcher: Demystifying Gold Investing.” He is also an advisor to the International Crisis Group, which works to resolve global conflict, and the William J. Clinton Foundation on sustainable development in nations with resource-based economies. Mr. Holmes is a much-sought-after conference speaker and a regular commentator on financial television. He has been profiled by Fortune, Barron’s, The Financial Times and other publications.


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