As some bus companies in China teeter on the brink of insolvency, the central government has passed new measures to prevent a wave of local bus routes from ceasing to operate.

The long-awaited Urban Public Transport Regulation, announced by the State Council on Oct. 23 and set to take effect on Dec. 1, will require local authorities to take direct responsibility for managing and funding public bus services.

“Without the consent of municipal governments, urban public transportation enterprises must not terminate services,” the document states.

The intervention by the central government follows reports of major cash flow issues at bus service operators across China, with a number of companies suspending services and falling behind on paying staff.

In early 2023, a bus company in Shangqiu, a city in central China’s Henan province, announced it was closing down due to severe financial problems caused by “the pandemic, the adjustment of the national renewable energy subsidy policy, financial subsidy shortages, and other factors.”

After the news went viral, local authorities in Henan stepped in to provide the necessary funding to allow the company to resume operations. But similar cases have emerged in other parts of the country in the months since.

According to media reports, several public bus companies in provinces including Heilongjiang, Liaoning, and Hebei have also suspended operations due to financial difficulties since early 2023.

China’s bus companies have encountered financial difficulties due to a steep fall in demand for their services. Bus ridership has declined by around 20 billion trips annually in recent years due to competition from ride-hailing and bike-sharing services, according to an article by Yang Xinmiao, deputy director of Tsinghua University’s Institute of Transportation, published in domestic media outlet China Newsweek.

China’s rapid population aging has exacerbated the issue, Wang Yuanyuan, general manager of Shanghai-based consultancy Easy Traffic Consulting, told Sixth Tone. Many cities have rolled out schemes to exempt senior residents from paying bus fares, which has further reduced bus companies’ income.

Public bus companies have become heavily reliant on government funding to remain solvent, with public subsidies typically accounting for more than half of their revenue, Wang said.

In recent years, this funding has increasingly had to come from local authorities, as the central government has scaled back subsidies for electric buses originally introduced in 2015 to support China’s green energy transition, he added.

But some local authorities have become reluctant to provide the finances to prop up loss-making bus services, as they face budget constraints due to declining income from land sales and other factors.

Local authorities often faced no legal requirements to continue keeping bus companies afloat. Though 10 Chinese provinces had passed their own regulations on this issue, the lack of a national-level rule meant officials in other parts of the country faced no such conditions.

In March, Ma Junsheng, former director of the State Post Bureau, told the Chinese People’s Political Consultative Conference that a lack of national oversight had left some municipal governments failing to assume responsibility for local bus systems. This had resulted in bus companies facing delayed payments of financial subsidies, Ma added.

The newly issued central government regulation directly addresses this issue, stating that city governments are the primary entities responsible for urban public transportation in areas under their jurisdiction.

The policy also requires local authorities to ensure that funding for public transportation is incorporated into their municipal budgets, so that they can provide bus service operators with financial subsidies in a timely manner.

Other parts of the regulation appear to be aimed at addressing widespread reports of local bus operators suspending, delaying, or reducing services at short notice, often without informing the public.

The document states that local authorities will be expected to ensure the public can access up-to-date information on local services, and prevent unauthorized changes to bus routes, stops, and schedules.

“Enhancing service quality and standards is essential to boosting the competitiveness and appeal of urban public transportation,” officials from the Ministry of Justice and Ministry of Transport emphasized during a press briefing on Oct. 24.

According to Wang, the new regulation signals a shift toward a more market-based approach to funding public transportation in the long term, as the government aims to improve efficiency and give companies greater freedom to raise revenues.

The document, for example, states that bus companies will be allowed to provide “customized transportation services” at market-adjusted prices, rather than public welfare rates.

This could lead companies to partner with schools and industrial parks to provide bespoke shuttle services to students and workers, Wang suggested.

The policy also seeks to establish a more market-oriented system governing how local governments contract out bus services, with the goal of improving efficiency, he added.

(Header image: VCG)