Sunday, March 20, 2011

China and high-speed rail: A cautionary tale for California

China's High-Speed Rail Under Fire
By Quincy Yu and Jane Lin
Mar 17, 2011

China’s growing high-speed rail system is unprofitable, corrupt, and unsafe, according to recent reports in the Chinese press.

The first volley came from Feng Peien, a member of China’s quasi-legislature, at a recent political meeting in Beijing. He questioned the benefits, debt load, safety, and decision-making process surrounding China’s high-speed rail project. The state invested 700 billion yuan (US $106.53 billion) in railway expansion last year, with 500 billion (US $76 billion) of it in high-speed rail, whereas the country’s total investment in technology and education was only 400 billion yuan. Feng said the construction cost on paper for high-speed rail is 100 million yuan (US $15.2 million) per kilometer, but the actual spending often far exceeded that. The debt thus accumulated by the Ministry of Railways is troubling, he said.

The Beijing-Tianjin line, China’s first high-speed rail, has not only been unable to pay off its debt, but continues to incur an annual loss of 700 million yuan (US $106.53 million), with 600 million of it used to pay interest.

High-speed trains also come with high fares. Ordinary Chinese are sometimes forced to take the high-speed train because the Ministry of Railways stopped some low-fare train services. That makes ordinary people frustrated.

A netizen wrote on the Internet last November that when he took the Shanghai-Hangzhou line not only was the first-class car completely empty, but he was the only passenger in the second-class car he was in.

The huge investment in high-speed rail construction and associated real estate transactions also provided a breeding ground for corruption. It was also tied up with the career path of Liu Zhijun, the former Minister of Railways who is now in prison for amassing a private fortune of US $120 billion. He was fired in February, and leaves behind a legacy of mismanagement and debt. During Liu’s term, China’s high-speed rail system underwent massive expansion, and it will reach 13,000 kilometers next year.

Feng Peien objects to things moving so fast. It’s a question of safety. While there have been no serious incidents so far, the standards aren’t up to scratch, he said. Elsewhere in the world construction is slow, steady, and tracks are not used until being subject to repeated loading tests. But in China construction has been rushed through. “We really could not guarantee the quality of our construction work,” an engineer at a large rail state-owned enterprise was quoted as saying in China Economic Weekly. “For some projects, the step of survey, design, and construction were all done at the same time. Some projects were even worse and didn’t even go through these three steps.” Another engineer, retired, said he would never in his life take a Chinese high-speed train. His remarks were widely quoted in state media.

The design, construction, supervision and operation of China’s high-speed rails was carried out entirely by the Ministry of Railways, and this lack of oversight is another concern. While Liu Zhijun’s political career is over, the problems with China’s high-speed rail have just started to unfold, according to Kato Yoshikazu on the Financial Times’ Chinese website. “Because Liu’s high-speed rail network development was way too fast and lacked respect for economic laws, it is hard to make a profit,” Yoshikazu said. He also pointed out that the debt ratio of the Ministry of Railways stands at 70 percent. If that were a private company, he said, it would not be far from bankruptcy.

Thanks to High-Speed Train Talk for the link.