GO
Loading...

China’s High-Speed Rail Plans Falter

With the same force that powered the most ambitious rail programme in history, China has slammed the brakes on its investment in high-speed trains.

A CRH high-speed train runs on the Zaozhuang section of Beijing-Shanghai high-speed line.
Getty Images
A CRH high-speed train runs on the Zaozhuang section of Beijing-Shanghai high-speed line.

The sudden halt has led to system-wide whiplash, leaving workers without pay, battalions of heavy machinery sitting idle and setting back plans for bullet trains that were meant to carry the nation’s future.

In the farm fields of Bazhou, unfinished pillars and silent cement mixers stand along a gravel path that was designed to be a key link in the high-speed network, connecting Tianjin with Baoding in the north-east. It is now one of the dozens of large rail projects suspended after a crash in July left 40 people dead near the eastern city of Wenzhou. The crash revealed how China had cut corners in its haste to build the world’s biggest bullet train system.

“Everything is a lot harder. There is no money, so we can’t even pay our workers. And quality checks are extremely strict,” said a crew boss from the China Railway Engineering Corporation, the state-owned enterprise that has laid most of the nation’s rail tracks.

With the broader economy now slowing, the government has signalled it might relaunch some of the stalled investment plans as a way of stimulating growth. For now, from a peak of about 600 workers, a group of 20 remain at the Bazhou site, lugging sacks of gravel to pave a service road that will run alongside the future track – whenever it is completed. It was the only part of the project that had received approval, according to the crew boss.

Wang Mengshu, deputy chief engineer at the China Railway Tunnel Group, told state media last week a shortage of funds had halted the construction of more than 10,000 km of track nationwide. Without a resumption, the 6m workers employed in the rail industry would begin to suffer, Mr Wang added.

After receiving a torrent of government cash for years, the sudden shortage is new and uncomfortable for China’s tight-knit railway industry. Before the Wenzhou accident, high-speed rail had been a source of immense national pride. The country’s first bullet train only started running in 2007 but within four years China had developed the world’s largest high-speed network. The boom was supposed to roll on for another decade at least, with plans to double the length of its high-speed rail lines by 2020. But confidence has faltered.

“We need to seriously check our designs from the foundations up and pinpoint the flaws. After all, high-speed rail is a new thing,” said Huang Zhiyi, deputy director of the Institute of Transportation Engineering at Zhejiang University, a major centre for research and development in the Chinese rail industry.

Spending had already been slowing after a surge from stimulus money in 2009 but the decline since the Wenzhou crash in July has been precipitous. In year-to-date terms, investment in railways and transport had been up 7 per cent in the first half of 2011. By the end of September it was down 19 per cent, according to official data.

There is little chance of a return to the construction frenzy of the past five years but the government appears to be slowly setting the high-speed rail plans back in motion. Restarting the investment would provide an immediate boost to the weakening economy. Longer term, it is also expected to encourage a big structural shift, opening up China’s interior to make domestic growth more self-sustaining.

Beijing’s first task has been to appease investors. Concerns about the railway ministry’s fast-growing debt – Rmb2,100 billion ($330 billion) and counting – and tight monetary conditions had combined with the deadly crash to damage market sentiment, forcing the ministry to put off plans to raise capital.

To break the logjam, the finance ministry announced this month it would cut taxes by half on interest earned from railway bonds issued between now and 2013. That smoothed the way for the sale of Rmb20bn in debt, with more on the way. At the same time the State Council has ordered banks to extend more loans to the railway ministry.

But Beijing must also address concerns among the train-riding public. Passenger numbers have fallen sharply since the Wenzhou crash. About 151 million trips were made on Chinese trains in September, almost 30 million fewer than in July, according to ministry data.

For Zhao Jian, a railway expert at Beijing Jiaotong University and a long-standing critic of the bullet train programme, the slowdown in investment will be a lost opportunity if it is not accompanied by what he calls “systematic reforms”.

But beyond ordering a thorough safety review, Beijing has showed no appetite for such fundamental change. The concrete plants next to the Bazhou track have not been dismantled. Their doors have only been padlocked and are waiting to be reopened.

Contact Business

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    To learn more about how we use your information,
    please read our Privacy Policy.
    › Learn More