蜡笔小新2016梦幻世界:Building China's ghost train | Roger Irvine | Commentary | Business Spectator

Building China's ghost train
Roger Irvine
Published 1:06 PM, 16 Mar 2011
Lowy Interpreter
China's emphasis on rail development isunderstandable given the huge demands placed on its railway system andwhat will be expected of it in the future. Those demands areaccelerating in step with the relentless pace of its overall growth andurbanisation. Despite the expansion of China's network and highutilisation rates, rail capacity remains under great pressure,especially for freight, which has had to meet a massive requirement totransport coal and other bulk commodities. A 2007 Deutsche Bank reportclaimed only one third of rail freight demand was being met.
Pressures on China's passenger rail capacity arelegendary, especially during peak holiday seasons such as the annual NewYear Spring Festival. During such peak periods, freight services areoften suspended. In 2010, China's railways delivered about 1.5 billionpassenger journeys, including about 210 million who travelled during theSpring Festival alone. While rail freight demand has been forecast toalmost double by 2020, passenger demand is projected to more thantriple.
Clearly, then, the future gigantic demands on China’stransport systems warrant a major rail expansion. The question thenbecomes whether the emphasis on high-speed rail is appropriate.
The World Bank has been circumspect, but on balancehas come down quite strongly in support of China's dramatic expansion ofhigh-speed rail. The World Bank's John Scales concludes that China'shigh-speed network satisfies 'most of the success factors', especiallyon its busiest routes. Many factors, he assessed, came together in Chinain a way that was 'distinctly favourable' to delivering an efficient,high-speed passenger rail network.
Other external appraisals have been less cautious.Dragonomics, a Beijing-based research firm, acknowledged that, to some,China's high-speed rail might seem an extravagant indulgence. ButDragonomics saw such criticism as misguided, arguing that high-speedrail is part of a desperately needed upgrade of the country's railsystem. Building the network within a short time-frame produced "massiveeconomies of scale", and building now while labour costs are still lowis "smarter than waiting a decade or two". Dragonomics concluded thatChina is only following the example of other countries in using statefunding to subsidise high-speed rail, and that it is "an investment wellworth making".
Investment advisers JP Morgan also gave an upbeatassessment in a report that argued the enhanced mobility created byhigh-speed rail was already changing China's economic and businessenvironment.
The generally optimistic tone of foreign commentaryis mirrored within China, as might be expected – the great majority ofChinese academics, media and government spokespersons have been positiveabout the advantages of high-speed rail. The Ministry of Railways hasdescribed high-speed rail as the "safest, fastest, most economical, mostenvironmentally friendly, most reliable" mode of transport available.
Against this strong tide of enthusiasm, a handful ofexperts and observers have voiced some important counter-arguments. Tothese critics, the concentration of resources on high-speed rail –rather than on less expensive rail systems – mirrors an officialdevelopment strategy that benefits the advanced sector of the economyand China's wealthiest citizens at the expense of still-growing incomeinequality between rich urbanites and the rural poor.
Professor Zhao Jian at Northern Transport Universityargues high-speed rail is better suited to countries with smallerterritories and that the economic value of time saved is less in China.He believes high-speed rail will be unaffordable for most people andthat his views have been proven by serious losses incurred on the newestlines. He asserts that due to the waste involved in China's "blindpursuit" of high-speed rail it will face huge economic, social andpolitical risks, and that a major debt crisis is looming that couldbecome a serious drag on economic development. He believes the country'stransport needs would be better met by a larger national network thatavoids excessive reliance on costly high-speed trains. "The governmentjust wants to have the biggest and fastest number one train set in theworld", he says.
Similar views have been expressed by Michael Pettis, aprofessor of finance at Peking University, who thinks high-speed railis a "trophy" for a country that, for its level of development, probablyalready had the best infrastructure in the world. According to MorganStanley's Stephen Roach, China's investment in fixed assets – much of itfor rail – accounted for 45 per cent of GDP in 2008. This, he declared,was "ridiculous, unsustainable" for any economy.
China Daily hasreported a Shanghai survey which found that only 10 per cent ofrespondents thought high-speed fares were fair and acceptable. Therehave been numerous other references in China's news media to low ticketsales for several high-speed lines and to the high cost of tickets. Manytrains are reported to run with 50 per cent or more of seatsunoccupied; during my own use of the Guangzhou to Wuhan line last year,less than 10 per cent of seats were occupied.
The prospect of future difficulties for China's high-speed rail is reinforced by reports from Financial Timessources that the Chinese Academy of Sciences in November 2010 presenteda report to the State Council highlighting concerns about unsustainabledebt levels and under-utilisation of new lines. Provincial governments –having also caught the fast train fever – are said to be proposing afurther huge expansion of the network.
The South China Morning Postrecently carried an article quoting sources in China who believe thecement quality of high-speed rail track is being degraded by the use ofinferior fly ash, which may shorten its lifespan and create safetyproblems. And in February 2011, Railways Minister Liu Zhijun was removedfrom his position for "severe violations of discipline", leading the New York Timesto speculate that this raised doubts about the safety, financialsoundness and long-term viability of China's high-speed railways. Also,an analysis by Minsheng Bank reportedly found the Ministry'sindebtedness could reach 70 per cent of its assets by 2020, and thathigh-speed rail might remain a money-loser until 2030.
These reports give increased credibility to thecritics' arguments and reservations, but they seem unlikely to interruptthe current momentum. High-speed rail is programmed to be one of thepillars of economic development in the new Five Year Plan. According tothe Beijing Review,the Ministry of Railways' vision is that, by 2020, China's high-speedrail network will extend over 50,000km (presumably including dual-usefreight/passenger lines) connecting all provincial capitals and citieswith populations over 500,000. The network would be accessible to 90 percent of Chinese, allowing them to "travel across the country withease". Neighbouring provincial capitals would be only one to two hoursapart, and provincial capitals would be only a half to one hour apartfrom other cities in their province.
The audacity and breathtaking ambition behind China'splans for high-speed rail are clear. If it succeeds, it will be theenvy of the world, especially among countries that are similarlyexpansive geographically. If it fails – and the most likely cause offailure would perhaps be if anticipated future economic growth is moredisappointing than expected – there would be difficult questions toanswer in attempting to justify the resources expended.
Nevertheless, superlatives abound. China's currenthigh-speed railway development has been variously and justifiablydescribed as the biggest, the most ambitious and the mosttechnologically-sophisticated rail expansion in history. By around 2015,China is likely to have built a new mass transport mode on a scaleunequalled anywhere else in the world. Whether it will prove to be acatalyst for further growth or a monument to a regime that overreacheditself remains to be seen.