China Can Use Market-Based Solutions for its Congestion Problems

According to a recent article in The Atlantic the car has replaced the bike in the streets of Beijing:

Today the cars have taken over. In fact, Beijing more and more is just another traffic-clogged city with Chinese characteristics. Its bike lanes are rapidly filling with parked cars, auto rickshaws spewing exhaust, and strolling pedestrians.

To many Chinese, bikes are now for losers. The iconic Beijing bicycle is a sorry one-gear affair with a metal basket on the front which breaks so regularly that every street corner seems to have a makeshift fix-it stand.

“There is a quote: ‘I would rather cry in a BMW than smile on a bike,'” says Jinhua Zhao, an urban planning professor at the University of British Columbia who’s conducting a study of cycling in Beijing. He’s found that bicycle use in Beijing has dropped from about 60 percent in 1986 to 17 percent in 2010. At the same time, car use has grown 15 percent a year for the last ten years.

This has caused some bicycle advocates to start waxing poetic:

The loss of a bike culture is a shame, says Shannon Bufton, the Australian-born founder of an NGO called Smarter Than Car. “It’s like Venice and gondolas. They go together, Beijing and the bike,” he says.

Chinese consumers buy automobiles for the same reasons that American consumers buy them: a growing middle class and urbanization. Over the last ten years more than 300 million Chinese have moved into the middle class. Contrast that with the 310 million people in all of the United States. According to Forbes, by 2030 China will have 1.4 billion middle class consumers compared with 365 million in the U.S. and 414 million in Europe. China’s demand-driven economy is creating a middle class, something most U.S. policy analysts believe is a positive. This large American middle class is one reason that the U.S. has such a strong economy.

As recently as 1985 no more than 20 percent of all Chinese lived in cities. By 2005, the number had climbed to 50%. By 2045, it may reach 75%.

With more cars comes more congestion. The congestion and the resulting pollution are real problems, but ultimately solvable. China has tried conventional big government solutions to fix its problem without much success. During the 2008 Olympics, its 50,000 rental bikes sat largely unused at kiosks. China’s policy of blocking drivers from entering Beijing one day a week has not reduced congestion. Limiting registrations for new cars and imposing strict driving time restrictions on car owners have proven more successful. But at what cost? Draconian government restrictions limit China’s demand-driven economy

Building new highways is part of the solution, but it is no panacea either. Beijing is expected to have 7,000,000 drivers by 2015. Each day an average of 1,900 new vehicles enter the capital city. And while seven new highways beginning in Beijing will be constructed by 2015, they will likely only be a short-term solution to the congestion problem.

China can solve the problem by implementing market-based solutions. For example, single-occupant vehicles could be required to pay a small fee to use a stretch of highway and vehicles with three or more occupants could use the highway for free. Buses can use special express lanes to take a guaranteed congestion-free trip throughout the city. Major arterials could have queue jumpers that allow commuters to pay a modest price to avoid congestion.

Market-based solutions can be implemented on transit as well. To reduce crowding, Beijing’s metro can charge different prices based on the level of congestion. The most popular travel times would have the highest prices. Off-peak hours would have a lower price. The country could use the resulting funds to build new train lines or add extra trains during the most popular hours. If the transit commute was faster and more reliable additional commuters might use it. Pricing also encourages some travelers to make their trip to work slightly earlier or later.

China’s economy is creating a large number of middle-class employees. And these employees are using their wealth to buy automobiles in record numbers. However, arbitrary regulations that do little to reduce congestion are not the solution. And pining for the good-old-days when everybody commuted by bicycle and lived in the lower class won’t help either. China is embracing its own version of Capitalism at a record pace. It is time for the country to use market-based pricing to start solving its congestion issues.