Is China’s much-hyped and fast-expanding network of high-speed railways bracing for a slowdown?
After the head of China’s Ministry of Railways, Liu Zhijun, was removed last week because of an investigation into possible corruption, questions are being asked by various high-speed train experts whether the sacking of its leader would force the ministry to revise its plans to expand high-speed rail links across China.
- Stefen Chow/Bloomberg
- A high speed train leaves the Wuhan Railway Station in Wuhan, China, on Wednesday, Sept. 29, 2010. China’s Ministry of Railways has racked up more than $200 billion in debt, government auditors say, partly because of aggressive expansion of the country’s high-speed rail network. Experts say high ticket prices mean many of the trains on the new Wuhan-Guangzhou line run empty.
Those questions are even more pertinent now with the revelation this week that the railways ministry under Mr. Liu’s stewardship has run up debts possibly in excess of 2 trillion yuan, or roughly $303 billion.
The Global Times, citing a report from the National Audit Office, said in its Wednesday edition that China’s Ministry of Railways was 1.3 trillion yuan in debt in 2009, with 854.8 billion yuan in short-term debt and 448.6 billion yuan in long-term debt. The paper quoted Zhao Jian, a researcher at Beijing Jiaotong University, as saying that “the debt had at least reached 2 trillion yuan by now, and the interests of those debts have grown too large for the government to afford.”
Some experts say those debt levels are unsustainable, even for a government accustomed to running up massive infrastructure tabs, given that many of the country’s high-speed rail links are having trouble making money.
The country already has built a high-speed rail network that as of November last year stretched 7,531 kilometers, according to the ministry. By 2020 China plans to expand the network to stunning 16,000 kilometers. Yet it’s not clear whether there’s sufficient demand to support all the construction. A senior Beijing-based executive for a foreign high-speed train producer that has transferred technology to Chinese train-set makers says that on many high-speed rail routes, such as the one linking the southern city of Guangzhou and the central city of Wuhan, some trains run “nearly empty.”
With high-speed trains failing so far to attract significant riders, and the railways ministry in such dire shape, a number of experts have begun to question the wisdom of the project.
Among the most damning of the criticisms, especially for a government whose oft-trumpeted motto is “Serve the People,” is that the high speed trains now linking major cities such as Beijing, Tianjin, Wuhan, Xian, Zhengzhou, Guangzhou, Shanghai and Nanjing do not benefit the general public, largely because of high ticket prices.
An end-to-end ticket on the high-speed Wuhan-Guangzhou line currently costs 469 yuan, or $70. That’s roughly the same price as an airline ticket booked a week in advance and twice as much as the most expensive “soft sleeper” ticket on the regular speed Wuhan-Guangzhou train.
Those numbers have led some in China to label the high-speed trains the “white-collar railway.”
The money being poured into high-speed railway projects, Beijing Jiaotong University’s Mr. Zhao tells Global Times, “could be used to develop the general rails, which could be more cost-effective to ease the transportation pressure.”
–Norihiko Shirouzu, with contributions from Josh Chin
The humorous part is that most of the rail projects in Europe have massively undershot their ridership projections and overshot their cost projections. They are pork and glamour projects, not serious transportation investments. That goes double in China, which is building way too fast to maintain cost control. Even the Chinese Academy of Sciences has criticized this program.
Don’t see how the numbers will work out.. The price of the tickets is high relatively but low absolutely. The best trade in the coming years has to be shorting chinese banks.
I think the author is just sour is all. Anyway, If China don’t built rails than what 8 lanes super-highway? Petroleum is a finite resources and electricity generation is well has more options than finding new oil wells. Don’t even talk about more air traffic. I sure as well don’t want my plane to spin around for 40mins before finally getting permission to land.
The volcanic ash that crippled most of Europe would like to have a word with you. Yeah yeah it is once in a million event but the damage it cost in terms of lost revenue and peoples’ productivity will say otherwise.
I have never considered WSJ to be a tabloid but oh well…