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FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 0578
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC
RUCPDOC/USDOC WASHDC
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RUEAIIA/CIA WASHDC
RUEKJCS/DIA WASHDC
RHHMUNA/HQ USPACOM HONOLULU HI

UNCLAS SECTION 01 OF 03 GUANGZHOU 017249 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
COMMERCE FOR ITA/MAC- DAS LEVINE, MCQUEEN 
 
E.O. 12958: N/A 
TAGS: ELTN ECON ETRD EINV CH HK
SUBJECT: SHENZHEN METRO'S EXPANSION PLANS ON TRACK 
 
 
¶1. (SBU) Summary.  The Shenzhentong, a smart card used to 
pay for public transportation much like Washington's 
SmarTrip, is proving quite popular with Shenzhen commuters, 
gaining 10,000 new cardholders each day.  Already in use at 
all metro stations, Shenzhentong is now working to expand 
its aboveground coverage, from its current 40% to 70% of all 
buses and taxis.  Meanwhile, negotiations are underway with 
retailers, financial institutions, universities and 
government departments to allow wider use of Shenzhentong 
cards, following the model of neighboring Hong Kong's 
Octopus.  At the same time, Shenzhen Metro is also expanding 
its core business of running subway lines.  Currently, 
Shenzhen Metro's network is very limited, and mainly focused 
on providing access to and from the border crossings with 
Hong Kong.  However, ongoing and planned projects should 
improve connections between points in the city, as well as 
between Shenzhen, Hong Kong and other points in the Pearl 
River Delta.  End summary. 
 
¶2. (U) On May 25, EconOffs visited Shenzhen Metro 
Corporation and met with General Manager Shi Yousheng, to 
discuss the expansion of both the Shenzhentong smart-card 
system and the city's subway network.  Also present at the 
meeting were Senior Engineer Zhang Ming, manager of Shenzhen 
Metro's programming, planning and statistical department; 
and Shenzhentong General Manager Jia Jungang.  Shenzhentong 
was set up to develop the smart card project Shenzhen Metro 
and three other companies, including Shenzhen Bus Group, the 
city's largest bus company. 
 
--------------------------------- 
SHENZHENTONG: Shenzhen's SmarTrip 
--------------------------------- 
 
¶3. (U) Shenzhentong is Shenzhen's answer to Washington's 
SmarTrip, with which most of our readership is probably 
familiar.  (Note: `Tong' means "to communicate" or "to 
connect" in Chinese.  Its official English name is Shenzhen 
TransCard.  End note.)  Both are rechargeable cards that 
allow the user to pay for various modes of public 
transportation, facilitating seamless transfers between 
them.  By late May, approximately 620,000 Shenzhentong cards 
had been issued, and the number is growing by 10,000 new 
cards each day.  The company expects to issue two million 
cards by the end of the year, far surpassing its initial 
estimate of 1.5 million.  Approximately 500,000 Shenzhentong 
transactions are carried out each day.  Shenzhen Metro 
collects an average of about 210,000 subway fares a day, of 
which 80-90,000 are paid with Shenzhentong cards. 
 
¶4. (SBU) Shenzhentong is also working with the city's 42 
aboveground public transport companies to expand the 
system's coverage from 40% to 70% of all buses and taxis. 
On average, 120,000 bus fares are paid for each day with a 
Shenzhentong card, out of a total of some 3.36 million. 
According to a recent press report, 1,700 of the city's 
public buses are equipped with Shenzhentong readers. 
Meanwhile, only 100 of the city's estimated 12,000 taxis 
have readers, but the company expects half of the 2,000 new 
taxis that will enter service in Shenzhen by the end of 2006 
will have readers. 
 
Hong Kong's inspiration: One card fits all 
------------------------------------------ 
 
¶5. (SBU) Given Shenzhen's proximity to Hong Kong, it is safe 
to assume Hong Kong's Octopus smart card system has been the 
main inspiration for the Shenzhentong, if not the whole 
metro system.  Metro stations in Shenzhen are very similar 
to their Hong Kong counterparts in terms of design and 
layout, and even the Shenzhen Metro logo is almost identical 
to that of MTR, the company that runs Hong Kong's metro. 
Therefore, it is not surprising that Shenzhen Metro is 
seeking to expand usage of Shenzhentong in some of the ways 
that have made Octopus one of the most successful electronic 
cash systems in the world. 
 
¶6. (SBU) Shenzhentong is already discussing with financial 
institutions the possibility of integrating bankcard and 
credit card functions into Shenzhentong cards.  It has also 
contracted with newspaper groups to install readers on 
vending machines, and is negotiating with McDonald's and 7- 
 
GUANGZHOU 00017249  002 OF 003 
 
 
Eleven to install point-of-sale (POS) readers at their 
stores.  Eventually, the company hopes that many of the 
various identity cards currently used by Shenzhen residents, 
e.g., student and disability cards, will be integrated into 
their Shenzhentong cards. 
 
One Country, One Card 
--------------------- 
 
¶7. (SBU) Shenzhentong and Octopus both hope to make their 
systems interoperable, but progress has been slow.  Jia 
estimated that interoperation could take place by December 
2006, but Shi quickly dismissed that suggestion aside, 
instead providing a more modest estimate of 2010.  Making 
the necessary adjustments to all the readers is a daunting 
task.  In Hong Kong alone there are 40,000 Octopus card 
readers, and there are several thousand Shenzhentong readers 
in Shenzhen, according to Jia.  Additionally, both sides 
still need to devise a sensible plan to deal with 
fluctuating exchange rates between their two currencies. 
 
Hong Kong takeover? 
------------------- 
 
¶8. (SBU) Shenzhen Metro officials did not appear 
particularly excited about the plans for interoperation.  In 
fact, both Shi and Jia suggested that it is basically Hong 
Kong's MTR that is pushing for it, in anticipation of its 
coming incursions into Shenzhen.  Last year, MTR reached an 
agreement with the Shenzhen government to construct an 
extension to Line 4, and to operate the entire length of the 
line once completed, including the part currently operated 
by Shenzhen Metro.  MTR also signed agreements to invest in 
the construction of lines 2 and 3.  Moreover, according to 
Jia, it is the Hong Kong side that has slowed down progress 
on interoperation, demanding "too many" technical 
specifications just to skew the bidding process in favor of 
a Hong Kong company. 
 
---------------------------- 
EXPANSION PLANS: Much needed 
---------------------------- 
 
¶9. (SBU) Shenzhen Metro currently operates two metro lines: 
Line 1 and Line 4.  Significantly, both existing lines have 
terminals on the Hong Kong border, at the Luohu and 
Huanggang crossings, respectively.  Huanggang is only a 
vehicle crossing at this point, but Hong Kong's KCR is 
expanding its rail system to Lok Ma Chau, across from 
Huanggang on the Hong Kong side.  There is already a KCR 
station across the border from Luohu (Lo Wu in Cantonese). 
Most of Shenzhen Metro's rolling stock is designed by 
Canada's Bombardier, and made by a joint venture between 
Bombardier and the Changchun Railway Vehicles Company.  It 
also operates some cars made by a joint venture between 
Germany's Siemens and Shanghai Metro. 
 
¶10. (SBU) This current network is quite limited, given 
Shenzhen's huge sprawl.  Areas east of Shenzhen's 
traditional downtown near Luohu are not served at all by the 
existing lines, and neither is Shekou, a prosperous district 
favored by local expats, whose ferry terminal offers direct 
connections to Hong Kong, Macau and Zhuhai (including 
services to Hong Kong International Airport (HKIA) that 
allow the passenger to check-in at the ferry terminal and 
proceed to his flight without submitting to Hong Kong entry 
formalities).  Shenzhen's own Bao'an Airport is also not 
served. 
 
But help is on the way 
---------------------- 
 
¶11. (SBU) Shenzhen Metro expects the extension of Line 1 to 
Shenzhen's airport to be completed in 2008.  This direct 
connection to the Luohu crossing should help boost the 
airport's already significant Hong Kong-originated passenger 
base.  Meanwhile, construction on Line 2 is expected to 
conclude in 2010.  This line will run from Line 1 to Shekou 
and its ferry terminal.  Passengers will also have the 
option of traveling on to Hong Kong via the Western 
Crossing, a bridge from Shekou to Hong Kong's New 
Territories.  Moreover, General Manager Shu said that 
 
GUANGZHOU 00017249  003 OF 003 
 
 
"[they] hear" MTR is planning to build a metro line 
connecting Hong Kong and Shenzhen airports.  According to 
Shu, the new line would be built to support existing plans 
to move all of HKIA's China-bound flights to Shenzhen 
Airport. 
 
Out to the sticks 
----------------- 
 
¶12. (SBU) The undergoing expansion of Shenzhen's metro 
system should also help Longgang and Bao'an, the two 
Shenzhen districts that are not part of the Special Economic 
Zone (SEZ), and that have consequently largely missed out on 
Shenzhen's growth bonanza.  Line 3, which is expected to be 
finished by 2009, will connect the Futian and Luohu 
districts with Longgang, with 13 stations outside the SEZ. 
Bao'an, for its part, will benefit from the extension of 
both lines 1 and 4 to new terminals in Bao'an, at the 
airport and Longhua Township, respectively. 
 
And then more 
------------- 
 
¶13. (SBU) Looking ahead, Shenzhen Metro plans to start 
building Line 5 in 2007, and hopes to also start 
construction on Line 8 during that year.  Line 5 will run in 
an arc across the north of the city, connecting all other 
lines.  Meanwhile, Line 8 will connect Luohu with the 
Yantian district, where the city's largest container port is 
located.  There are no timelines for the construction of 
lines 6 and 12, which would run entirely in Bao'an and 
Longgang, respectively, despite the fact that both lines are 
marked on Shenzhen Metro's master planning map. 
 
On to the PRD 
------------- 
 
¶14. (SBU) The expansion of Shenzhen's metro system will also 
help increase the city's connectivity with the rest of the 
Pearl River Delta (PRD).  When expanded, Line 4 will reach 
Longhua Station, from which new high-speed lines are being 
built to Guangzhou to accommodate the new Express Rail Link 
(ERL) between Hong Kong and Guangzhou.  The new lines are 
expected to be in place by 2010.  There is also talk of 
building a spur from those lines to connect Guangzhou and 
Dongguan with Shenzhen Airport and Shekou. 
 
COMMENT:  The little metro that could? 
-------------------------------------- 
 
¶15. (SBU) Shenzhen's metro still has a long way to go before 
it comes close to truly resembling Hong Kong's, but it is on 
the right track, at least on paper.  However, the MTR's 
appropriation of Line 4 does merit extra attention.  As 
Shenzhen and Hong Kong's transportation networks become more 
integrated, perhaps it is Hong Kong interests that will set 
the norms -- and the priorities.  Focusing Shenzhen's 
transport infrastructure on border crossings will be a boon 
for cross-boundary trade, but it might not be as great for 
its development as a city.  With a population that already 
surpasses ten million, the city cannot afford to view itself 
-- and be viewed by others -- as Hong Kong's appendage. 
 
DONG