Chunyun: The Dilemma of Price

Chunyun, meaning transportation during Spring Festival vacation, always causes severe problems in China every year. One of those problems is the difficulty of obtaining tickets of trains and planes. Railway ticket is particularly hard to get, because the price is pretty low due to government control, railway transportation becomes the first choice of low-income population such as labor workers and the majority of college students. According to the State Planning Agency at a press conference in 2014, during Spring Festival, there are 42 million trips by air and 258 million trips by train, overwhelmingly higher than other seasons. Unfortunately, those numbers are still increasing every year.

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Though the railway system is a monopoly directly under government control, without generating madness of low-income population against the government,  it sets the price of railway tickets much lower than any other markets of transportation (where competition exists). Such a lower price, unsurprisingly, creates a huge gap between the actual price and the equilibrium price during the time of Spring Festival transportation headaches, which are worsened when more people stand in long lines in order to buy just one ticket. A Chinese economist, Mao Yushi, suggests a strategy, which increases the price of railway tickets in Spring Festival to reduce the stress of Chunyun. According to him, the demand is a lot higher than it should be. People have to queue up to buy tickets, and the opportunity costs of waiting in line compensate or even exceed the increase of ticket prices if such increase is allowed. One more problem to be added, is the flow of revenue from government to those ticket scalpers, who trained themselves especially capable of getting extra tickets and sell them in skyrocketing prices. The point is that, even the government mandatorily sets up a lower than normal price, the market finds some way to work around it. And the consequence, is that the revenue which should be earned by the government, goes directly to those ticket scalpers.

In face of the shortage of train tickets, the low-income population must find alternatives to come back home. The price of taking buses increases too at this time, partly because of the  substitution from railways. However, bus is not suitable for really long-distance travel and most travelers have distance of traveling way beyond the limit buses can efficient for. Flight ticket does not have an overwhelming increase at this time because most train riders find it to be too expensive to afford.

Moreover, if government lets the price increase to the equilibrium, the shortage of railway tickets could not happen, but people would blame the government for their inability of traveling back home affordably because the railway system is directly owned and controlled by the state. Chinese government is in such a situation of dilemma that they have to keep the price low and leave the market being crazy. A better approach to this problem would be putting more effort into developing the economy of those destination provinces during Chunyun. the major reason for this huge flow of travelers is that the laborers in low-income provinces seek opportunities in better-paid provinces. Filling the gap of developed and under-developed provinces would cure the headaches, but the government tried, due to various reasons such as bureaucratic inefficiency and corruptions, it never manages a way to do so.

Work Cited,

http://www.bloomberg.com/bw/articles/2014-01-16/chinas-massive-spring-festival-travel-forecast-3-dot-6-billion-passenger-trips

http://maoyushi.blog.sohu.com/109586841.html

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