Beijing’s parking woes: Is there any end in sight?

Beijing’s parking woes: Is there any end in sight?

By Lulu Xue    November 13, 2013    0 Comments

Beijing’s motor vehicle ownership has reached 5.4 million, ranking it first out of all Chinese cities in motorization. To combat parking shortages, the Beijing Municipal Commission of Transport recently announced the addition of over 13,000 parking spaces to the city’s center – but that might not be an optimal solution. Photo by Leo Fung.

What do the time-honored hutong – quintessential narrow alleys of Beijing that date back to the Qing dynasty – and danwei – organized work and housing complexes from the pre-1979 era –have in common? Apart from the fact that neither has been replaced by modern buildings, one of their major similarities is that they were designed to serve pedestrians, not cars. However, as Beijing’s rate of motor vehicle ownership escalates, even hutong and danwei residents are opting for cars. Because the densely-populated central city, an area with over 23,000 people per square kilometer, is inherently at odds with intensive car usage and massive parking lots, continued motorization is exacerbating the challenges to sustainable urban mobility in Beijing.In late October, the Beijing Municipal Commission of Transport announced its solution to growing parking demand: increasing the number of parking spaces by over 13,000 during the coming year. Although parking shortages are certainly escalating in Beijing, the government’s sole emphasis on accommodating increased private motorization may not be an optimal solution.

Parking shortage in Beijing driven by rapid motorization

As China’s capital city, Beijing has an incredibly high concentration of both population and private motor vehicles. The total motor vehicle ownership in the city has reached 5.4 million, which ranks Beijing first in motorization out of all Chinese cities. The urban core, including Xicheng and Dongchengdistricts, has the highest vehicle density at 310 motor vehicles per 1,000 people – about 60 more vehicles than the city’s average. Compounding this intensive motorization is scarce land resources. According to the Beijing’s 12th Five Year Plan (2011-2015), new real estate projects are strictly forbidden within the Third Ring Road, a 48 kilometer (29.8 mile) road that encircles the city’s center.

Despite this rapid motorization, appropriate parking provisions have long been overlooked. The city’s first ever minimum parking requirement established in 1994 is still in effect today. The minimum mandates at least three residential parking spaces be provided per ten dwelling units even though Beijing’s current car ownership is about seven cars per ten households. On top of poor regulation, adding more parking spaces usually means a higher rent cost due to the increasing land prices.

With the gap between supply and demand widening, the parking problem spillover is becoming prominent. Parking encroaches upon bike lanes, sidewalks, bus lanes, and fire passages. It also clogs streets, posing threats to traffic safety and air pollution, along with inducing disputes over parking spaces.

In Beijing, parking often encroaches on sidewalks and forces pedestrians to walk in the street. Photo by Lulu Xue.

Details of the government’s response

Facing these challenges, the municipal government’s solution is to “squeeze” 13,000 to 17,000 new parking spaces into the central city in 2014. The government’s plan includes the following measures:

Going vertical: Encouraging multi-story parking structures within the old city

Going outside: Building new parking lots in the immediate proximity of the parking-limited areas

Going underground: Constructing underground parking lots

Shared parking spaces: Relying on shared parking in areas with the right blend of office and residential uses, because the two uses generally have different hours of usage

Time-restricted curb-side parking: Allowing residential curb-side parking with time restrictions

Removing illegal parking spaces and strengthening law enforcement

Additionally, the city’s planning bureau is also contemplating raising the minimum parking requirement from 1:0.3 to 1:1. If this new ratio is enacted for all new development, each dwelling unit will be equipped with one parking space.

Lingering issues

Although it’s too early to jump into conclusions about the effectiveness of the aforementioned government approach to Beijing’s parking woes, number crunching provides some interesting anecdotal evidence:

The increase in car ownership will still outrun parking supply. Despite existing car ownership restrictions, the number of motor vehicles in Beijing increased by 0.2 million in 2012, tremendously exceeding the planned 0.01 million parking spaces. The new parking spaces will quickly fill up as car ownership catches up.

It’s not technology but rather price that matters when it comes to parking management. The price of surface residential parking is regulated at a low rate – no more than 120 Chinese Yuan ($19.70 USD) per month – whereas privately provided structured parking usually comes at a much higher cost. Without getting the public-provided parking prices right, the efficient utilization of parking structures like the proposed vertical, outside, and underground lots cannot be achieved. Structured parking options like these have been previously tested in Beijing but were quickly priced out of the market, due to the low cost of surface parking.

Adding parking spaces may come at the cost of recreational public spaces, and the right-of-way of pedestrians and cyclists. Beijing has already seen road spaces taken up by parking, which has disrupted sidewalks and bike lanes. The Government’s new measures are too vague on how pedestrians and cyclists’ rights will be protected.

Parking shortages are not unique to Beijing – a host of Chinese cities are confronted with similar issues, and their municipal Government’s reactions have been almost exactly the same. Alternative measures including parking freezes, higher surface parking charges, and proof-of-parking are strategies that were deployed by cities like Tokyo and Hong Kong when they faced the same dilemma. Although Beijing’s context differs, it could still draw inspiration from these other major Asian cities. However, taking that first step will require a change in mindset: accommodating car growth and usage is no longer practical for densely-populated Chinese cities.

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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