Amidst the backdrop of China’s slowing economic growth and shrinking consumer demand, the subway industry, as the backbone of urban public transportation, is facing severe operational challenges. A recent report from the Shenzhen Metro Group under the State-owned Assets Supervision and Administration Commission of Shenzhen Municipality revealed a net loss of 3.361 billion yuan in the first half of this year, continuing the trend of significant losses from the previous year. This is not an isolated case, as out of 29 cities with operational subways in China, 26 cities reported operating losses after deducting government subsidies.
On the evening of August 22nd, Shenzhen Metro Group Limited (referred to as “Shenzhen Metro Group”) released its half-year report for 2025. The data showed that the company achieved operating income of approximately 7.284 billion yuan in the first half of the year, a year-on-year decrease of 21.67%. Although the loss margin has narrowed by about 432 million yuan compared to the same period last year, the net loss attributable to the parent company shareholders still stands at approximately 3.361 billion yuan, indicating a challenging operational situation.
Looking back at the full year of 2024, Shenzhen Metro Group incurred a historical loss of 33.461 billion yuan. While there has been some improvement in the first half of this year, the loss situation has not been reversed. As of the end of June, the company’s total liabilities amounted to 479.62 billion yuan, with an asset-liability ratio of about 60.46%, indicating significant financial pressure.
Analyzing the business structure, subway operations and integrated development with properties constitute the two major revenue pillars for Shenzhen Metro Group, but there is a clear trend of differentiation between the two. The subway, railway operation, and management design business generated operating income of about 5.592 billion yuan, a year-on-year increase of 16.34%. However, with business costs reaching 68.6 billion yuan, resulting in a gap of about 1.268 billion yuan, it highlights the profit dilemma facing subway operations.
Even more critical is the impact on integrated development with properties due to the severe downturn in the real estate market. The business experienced a sharp 63% year-on-year decline in operating income to around 1.625 billion yuan, with the income proportion dropping from over 50% in previous years to 22.3%. Shenzhen Metro Group attributed the revenue decline primarily to the cyclical impact of the real estate market.
Shenzhen Metro Group’s current predicament is closely related to its significant investment in Vanke. As the largest shareholder of Vanke, Shenzhen Metro Group currently holds a stake of 27.18%.
In 2017, during the peak period of the real estate market, Shenzhen Metro Group invested around 66.4 billion yuan to acquire Vanke’s shares from companies like China Resources and Evergrande. However, as the real estate market entered a period of deep adjustment, Vanke’s market value has plummeted from its peak to just over 80 billion yuan, less than one-fifth of its peak value.
Vanke recorded a net loss of 11.95 billion yuan in the first half of 2025, with performance continuing to face pressure, directly impacting the investment returns of Shenzhen Metro Group. More critically, Shenzhen Metro Group continues to provide financial support to Vanke. In the first half of this year, Shenzhen Metro Group provided a total of 23.88 billion yuan in loans to Vanke to maintain its normal operations.
In addition to direct loans, Shenzhen Metro Group supports Vanke through various channels. In April this year, Vanke’s subsidiary, China Jin Yinli Consumption REITs, was listed on the Shenzhen Stock Exchange, with Shenzhen Metro Group subscribing to around 1 billion yuan as an initial strategic investor, accounting for nearly 30% of the issuance size. In May, Shenzhen Metro Group won the bid for Vanke’s transfer of the Shenzhen Bay Super Headquarters Base project for 2.235 billion yuan. This continuous “blood transfusion” model poses significant ongoing financial pressure on Shenzhen Metro Group.
The predicament of Shenzhen Metro Group is not an isolated case but reflects the systemic challenges facing the entire subway industry in China. Against the backdrop of increasing downward economic pressure, factors such as declining urban passenger flow and the sluggish real estate market have led to a sharp deterioration in the operating environment of the subway industry.
Data shows that out of 29 cities with operational subways in the country, after deducting government subsidies, 26 cities have fallen into operating losses, making the profitability challenges in the subway industry a widespread phenomenon. Even tier-one cities with the highest passenger volumes have not been spared.
Beijing Metro incurred a loss of 24.104 billion yuan in 2024 (after deducting subsidies), with a daily average loss of around 66 million yuan, where ticket revenue covers only 14.5% of operating costs. Similarly, the ticket revenue coverage ratio for Guangzhou Metro has dropped below 30%. These figures indicate that even in core metropolitan areas, subway operations are facing serious imbalances between revenue and expenses.
The fundamental reason for this predicament lies in the economic nature of subway operations conflicting with the current economic environment. Subway construction involves massive investments, typically costing between 700 million to 2 billion yuan per kilometer, while ticket prices are strictly controlled at lower levels to maintain the public service nature of transportation.
Using Shenzhen as an example, the average one-way ticket price is only 4.3 yuan. Even if the passenger flow were to triple, ticket revenue would still struggle to cover operating costs. Despite setting a record with a daily average passenger flow of 8.03 million passengers and having the highest passenger flow intensity nationwide, Shenzhen Metro incurred operating costs of 18 billion yuan in 2024, with ticket revenue at 13 billion yuan, resulting in a gap of over 5 billion yuan.
Faced with substantial operating deficits, subway companies in various cities have adopted the “railway + property” model, aiming to generate revenue for transportation construction and operation through property development above stations. However, this model has exposed significant risks during the current downturn in the real estate market.
From 2021 to 2023, Shenzhen Metro Group’s revenue share from integrated development with properties exceeded 50%. However, with a deep adjustment in the real estate market, the business’s gross margin plummeted from 79% to 36.1%, while costs surged by 651%, posing a fundamental challenge to the profit model.
Government financial subsidies have become a crucial support for maintaining subway company operations. Statistics show that out of the 24 cities with disclosed subway company data, 18 cities have a dependency on government subsidies exceeding 100%, with Chongqing, Xi’an, Zhengzhou, and Suzhou showing particularly high reliance. Hangzhou, Chongqing, and Zhengzhou received government subsidies of 9.469 billion yuan, 8.529 billion yuan, and 7.568 billion yuan respectively in 2022.
The case of Kunming Metro Company is especially illustrative: with a total operating revenue of 0.629 billion yuan in 2022, operating costs reached as high as 1.559 billion yuan, ultimately achieving a meager profit of nearly 80 million yuan with a substantial operating subsidy of 0.975 billion yuan. This highly subsidy-dependent model not only puts significant pressure on local finances but also exposes the fundamental issue of subway companies lacking the ability to sustain themselves financially.