Supply, Demand And A 25-Mile Holiday Traffic Jam In China

A crowded Shanghai
A crowded Shanghai
Lin Caiyi*


In September, China’s National Development and Reform Commission announced that China’s highways would be toll-free during the Golden Week national holiday. To boost domestic tourism, certain local governments, such as in Jiangsu Province, also passed a decree banning price hikes on tourist attractions during the eight-day holiday break, which this year combined the Mid-Autumn Festival and China’s National Day.

Certain scenic spots were forced to reduce ticket prices for the duration of the holiday.

What was the result of these price cuts? According to Gaosu Net, the Chinese highway management company’s website, on the first day of the holidays, 85.6 million vehicles took to the roads. The traffic volume around China increased on average by 20-50%.

There were major traffic jams in more than 20 provinces across the country. The Sujiahang Highway between Suzhou and Hangzhou, two of the most beautiful cities of Jiangsu Province, had a traffic backup of 40 kilometers due to an accident. Sadly, the accident caused a pregnant woman blocked on the road to have a miscarriage, and a Shanghai-Beijing high-speed bus crashed into a container truck and burst into flames, killing six people.

Apart from the traffic, other dramatic holiday news made the front pages. Some 2,000 tourists were stranded at a cable-car station in Huashan Mountain; 20,000 travelers were stranded on Mount Putuo island; 10,000 arrived in remote Lijiang to find no more available accommodation; a sea of absolutely motionless cars was stuck on the road to Jiuzhaigou until midnight. Many scenic sites ran out of food, and queuing for the toilets took more than an hour.

This is definitely not what politicians had in mind when they decided to make the highways toll-free and lower ticket prices at scenic sites, even though Economics 101 teaches you that these are the basic consequences of supply and demand.

Half of China on the road

According to media estimations, more than 700 million people travelled during this year’s Golden week holiday. Most of the tragedies that occurred are related to this astronomical number.

What made the demand for travel explode during the national holiday? Apart from the fact that the holiday was longer than in previous years, the toll-free highways and low ticket prices certainly played an important role.

The semi-annual Golden Week holidays are the only time many Chinese people take off, usually to travel or visit their family and friends. Compared with the number of tourists during an ordinary period, the Golden Week holidays are like a tsunami.

Given the great variations in demand, a periodic shortage of tourist resources has existed for long time. It is commonplace for the prices of plane tickets and hotels to soar during holidays, for instance. "peak-clipping" (reduction in peak demand), "valley-filling" (increased demand at off-peak) and load-shifting (reducing loads during periods of peak demand, while building loads in off-peak periods) play an effective role in regulating people’s travels.

What is regrettable is that the administration ignored the contradiction of supply and demand during holidays and came up with policies that are against the law of economics. The result is that toll-road and bridge companies, as well as tourist attractions, suffered losses, and the public also paid a tragic price. Arbitrary administrative decisions replaced economic law and in the end, harmed the well-being of society.

“Would you rather pay the normal highway toll, or would you prefer to be stuck in traffic for three hours instead?” “Would you rather pay an extra 30% for a hotel or spend the night outdoors in the cold?” “Would you rather spend an extra 20% to get home in time or spend the night in an airport?” The vast majority of respondents give the same answer. Nobody wants to be stranded on a highway, in the street or at an airport. Let the price mechanism regulate demand. It will maximize the public interest.

The former Soviet leader Mikhail Gorbachev once asked Margaret Thatcher, the former British Prime Minister, “How do you see to it that people get food?” She answered that she did not, that prices did that. Indeed, the only thing the British government does to make sure that its people can feed themselves is to let the market-price mechanism play its role.

China has a population of 1.3 billion people and a strong festive culture. How does it ensure that people’s basic needs are met? There is only one answer: let the price mechanism play its role, whether it is for cars, boats, planes, tickets, highway tolls or hotel rates. The price fluctuation will adjust the demand. People who absolutely need to travel during the peak holiday season, i.e. the richer ones, can pay more. People who are poorer can save travel costs by travelling during the off-peak season.

Adjusting tolls according to peak, off-peak seasons

Some people hold the theory that highway traffic congestion was not caused because it was toll-free, but because of bad management. They forget that in the competition for a rare resource such as road space, the most effective managing tool is the price.

Some also say that highways should be free on normal days but should have tolls during holidays. These people also forget that the reason for congestion is that there are not enough roads for the people who are traveling. There is an imbalance of supply and demand. Hiking highway tolls to curb the peak demand is only one way of solving the traffic issue. Given how little the government spends on roads, getting more private companies to build roads and bridges is the only solution to solve the contradiction between supply and the demand.

Some point out that there is a huge disparity between the rich and the poor in China. If everything is regulated by price mechanisms, then the rich will win and the poor will lose out. In my opinion, the way to help the poor is by reducing their taxes, not by giving them things free of charge. Having things free of charge causes low efficiency and disorder and harms the well-being of society as a whole. It robs the rich without helping the poor.

*Lin Caiyi is an economist

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Preparing a COVID-19 vaccine booster in Huzhou, China.

Hannah Steinkopf-Frank, Anne-Sophie Goninet, Jane Herbelin and Bertrand Hauger

👋 Ciao!*

Welcome to Wednesday, where Brazil's senate backs "crimes against humanity" charges against Jair Bolsonaro, the UN has a grim new climate report and Dune gets a sequel. Meanwhile, German daily Die Welt explores "Xi Jinping Thought," which is now being made part of Chinese schools' curriculum.



• Senators back Bolsonaro criminal charges: A Brazilian Senate panel has backed a report that supports charging President Jair Bolsonaro with crimes against humanity, for his alleged responsibility in the country's 600,000-plus COVID-19 deaths.

• Gas crisis in Moldova following Russian retaliation: Moldova, one of Europe's poorest countries, has for the first time challenged Russia's Gazprom following a price increase and failed contract negotiations, purchasing instead from Poland. In response, Russia has threatened to halt sales to the Eastern European country, which has previously acquired all of its gas from Gazprom.

• New UN climate report finds planned emission cuts fall short: The Emissions Gap Report 2021 concludes that country pledges to reduce greenhouse gas emissions aren't large enough to keep the global temperature rise below 1.5 °C degrees this century. The UN Environment Program predicts a 2.7 °C increase, with significant environmental impacts, but there is still hope that longer term net-zero goals will curtail some temperature rise.

• COVID update: As part of its long-awaited reopening, Australia will officially allow its citizens to travel abroad without a government waiver for the first time in more than 18 months. Bulgaria, meanwhile, hits record daily high COVID-19 cases as the Eastern European's hotel and restaurant association is planning protests over the implementation of the vaccination "green pass." In the U.S., a panel of government medical advisors backed the use of Pfizer COVID-19 vaccine for five to 11-year-olds.

• U.S. appeals decision to block Julian Assange extradition: The United States said it was "extremely disappointed" in a UK judge's ruling that Assange, the founder of Wikileaks, would be a suicide risk of he traveled across the Atlantic. In the U.S., he faces 18 charges related to the 2010 release of 500,000 secret files related to U.S. military activity.

• Deposed Sudan prime minister released: Prime Minister Abdalla Hamdok has been released from custody, though remains under heavy guard after Sudan's military coup. Protests against the coup have continued in the capital Khartoum, as Hamdok has called for the release of other detained governmental officials.

Dune Part 2 confirmed: The world will get to see Timothée Chalamet ride a sandworm: The second installment of the sci-fi epic and global box office hit has officially been greenlit, set to hit the screens in 2023.


Front page of the National Post's October 27 front page

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Chinese students now required to learn to think like Xi Jinping

"Xi Jinping Thought" ideas on socialism have been spreading across the country since 2017. But now, Beijing is going one step further by making them part of the curriculum, from the elementary level all the way up to university, reports Maximilian Kalkhof in German daily Die Welt.

🇨🇳 It's important to strengthen the "determination to listen to and follow the party." Also, teaching materials should "cultivate patriotic feelings." So say the new guidelines issued by the Chinese Ministry of Education. The goal is to help Chinese students develop more "Marxist beliefs," and for that, the government wants its national curriculum to include "Xi Jinping Thought," the ideas, namely, of China's current leader. Behind this word jam is a plan to consolidate the power of the nation, the party and Xi himself.

📚 Starting in September, the country's 300 million students have had to study the doctrine, from elementary school into university. And in some cities, even that doesn't seem to be enough. Shanghai announced that its students from third to fifth grade would only take final exams in mathematics and Chinese, de facto deleting English as an examination subject. Beijing, in the meantime, announced that it would ban the use of unauthorized foreign textbooks in elementary and middle schools.

⚠️ But how does a country that enchants its youth with socialist ideology and personality cults rise to become a world power? Isn't giving up English as a global language the quickest way into isolation? The educational reform comes at a time when Beijing is brutally disciplining many areas of public life, from tech giants to the entertainment industry. It has made it difficult for Chinese technology companies to go public abroad, and some media have reported that a blanket ban on IPOs in the United States is on the cards in the next few years.

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Why this Sudan coup d'état is different

Three days since the military coup was set in motion in Sudan, the situation on the ground continues to be fluid. Reuters reports this morning that workers at the state petroleum company Sudapet are joining a nationwide civil disobedience movement called by trade unions in response to the generals' overthrow of the government. Doctors have also announced a strike.

Generals in suits At the same time, the military appears firmly in control, with deposed Prime Minister Abdalla Hamdok allowed to return home today after being held by the coup leaders. How did we get here? That's the question that David E. Kiwuwa, a professor of international relations at the University of Nottingham, takes on in The Conversation:

"Since the revolution that deposed Omar el-Bashir in 2019, the military have fancied themselves as generals in suits. They have continued to wield enough power to almost run a parallel government in tension with the prime minister. This was evident when the military continued to have the say on security and foreign affairs.

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True, the economy has continued to struggle from high inflation, low industrial output and dwindling foreign direct investment. As in all economies, conditions have been exacerbated by the effects of COVID-19. Sudan's weakened economy is, however, not sufficient reason for the military intervention. Clearly this is merely an excuse."

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Rome's Casino di Villa Boncompagni Ludovisi, better known as Villa Aurora, will be put up for auction in January for 471 million euros ($547 million). The over-the-top price tag is thanks to the villa having the only known ceiling painting by Renaissance master Caravaggio.

✍️ Newsletter by Hannah Steinkopf-Frank, Anne-Sophie Goninet, Jane Herbelin and Bertrand Hauger

Who wants to start the bidding on the Caravaggio villa? Otherwise, let us know what the news looks like from your corner of the world!!

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