The Chinese Government has put for- ward specifi c requirements for the fi scal revenue and GDP of the cities that are applying for metro construction so as to further strengthen the management of urban rail transit， according to a guideline published by the State Council， China’s cabinet， on July 13.
　　The guideline stipulates that the general public budget revenue of a city that applies for metro construction should be at least 30 billion yuan （$4.43 billion）， or 15 billion yuan （$2.22 billion） for the construction of a light rail network. Gross regional domestic product should reach a minimum of 300 billion yuan （$44.68 billion） to qualify for the construction of a metro system， and 150 billion yuan （$22.34 billion） for light rail.
　　In principle， the urban population should be larger than 3 million to justify a metro request and 1.5 million for light rail. Meanwhile， proposed projects for metro and light rail networks must anticipate daily passenger fl ow of 7，000 and 4，000 people per kilometer， respectively， in the prelimi- nary stage， while in the long run， peak-hour passenger flow should reach more than 30，000 and 10，000 people， respectively.
　　The new guideline also points out that projects that obtain substandard debt financing or fail to specify source funding for debt payment will not be approved.
　　The act of freezing， or calling off metro projects， is actually the result of policymakers reexamining plans for extensive metro construction since the second half of 2017 to prevent the risk of local debt leveraging.
　　Promoting infrastructure investment was previously a tool to support the economy amid downward pressure. In previous years， growing urbanization saw more people migrating to big cities for work， putting a strain on the traffic and transportation structures of many areas. The government hoped that the construction of metro networks in second-tier cities would drive regional development， encourage people to live in cities closer to home and alleviate pressure on megacities.
　　In 2015， the National Development and Reform Commission （NDRC） issued a guideline specifying the government’s role in the approval of metro applications. According to the guideline， the NDRC is in charge of verifying rail transit programs reported by local governments， and local governments are to make arrangements for the approval of specifi c items， investment and fi nancing. Since then， the construction of China’s rail transit has proliferated. 　　However， in order to stabilize growth， some local governments have developed too hurriedly， without the support of local populations and industries， a sufficient budget and a stable cash fl ow as a source of repayment. Some have exploited certain favorable policies such as Public-Private Partnership （PPP）， which was originally aimed at introducing social capital and reducing local debt but is instead being misused as an opportunity to implement new projects.
　　While China is remodeling its management of local debt by restricting central government bailouts and establishing a lifetime accountability system， financial organizations are still scrambling for local government projects， investing with the aid of shadow banking， assuming that the government will bail them out should they require it.
　　Hence， the Central Government has resolved to supervise the debt volume of local governments and the usage of debt funds， so as to pursue high-quality growth and eradicate profligate projects which amplify fi nancial risk.