Just say no to high-speed rail

Home > Opinion > Columns

print dictionary print

Just say no to high-speed rail

When awestruck visitors say they can see the future in China, they’re often talking not just about the sci-fi architecture and bedazzling mobile apps, but the country’s massive network of high-speed trains.

In just under a decade, China has laid nearly 12,000 miles of high-speed rail lines and plans to add another 6,400 miles over the next five years. This network — by far the world’s largest — has knitted together distant regions, improved logistics and opened up previously unimaginable travel opportunities (at least for those Chinese who can afford the tickets, which tend to price out lower-income travelers).

In recent months, however, Chinese leaders themselves have begun to question the business case for high-speed rail, especially as an export to other countries. The questions are a good reminder that China’s rail miracle may have run its course — and may never be repeated elsewhere.

The original case for high-speed rail in China was strong. In the mid-1990s, the country was considerably less developed than today; the average speed on Chinese railways in 1996 was 37 miles per hour, thanks to outdated technologies and overcrowding on too few tracks.

At the same time, the government faced far fewer obstacles to building high-speed lines than countries such as the U.S. do. Labor costs were low and acquiring land wasn’t difficult. (Eminent domain isn’t much of an issue when the government owns all the land.)

The government had plenty of money to spend, even as the vast distances involved created unique economies of scale: A 2014 World Bank analysis estimated that China spends between $17 million and $21 million per kilometer on high-speed rail, compared to $25 million to $39 million in Europe, and as high as $56 million in California. Most lines covered journeys of between two and three hours — what KPMG rail analysts call a “sweet spot” for making them economical to operate.

Even with these advantages, however, the costs have been considerable. In May, state-owned China Railway Corporation, the operator of China’s rail network, reported that its debt had grown 10.4 percent in the past year and now exceeded $600 billion; in 2014, roughly two-thirds of that debt was related to high-speed rail construction. That’s more than the total public debt of Greece. The company runs only one profitable line — the massively traveled Beijing-Shanghai corridor.

Costs are set to rise further. Now that most heavily trafficked areas are served by high-speed lines, construction is expanding to China’s less-populated and less-developed western regions, in part as a de facto fiscal stimulus. The government is building lines over greater distances and across more difficult geographies. Few can hope to earn back the investment.

Doubts about the wisdom of these projects are rising. As far back as 2010, prominent voices in China had warned that binge spending on high-speed rail could lead to a debt crisis, and that the same benefits could be achieved with conventionally built lines that cost about one-third as much. Traditionally ignored, concerns about rail-related debt are now gaining weight, leading to prominent calls to break up the massive China Railway Corporation. So far, however, the government has yet to take the natural step and cancel major high-speed projects.

Where the backlash is being felt most acutely is abroad. From the earliest days of high-speed rail, China has hoped to export its technology.

Those ambitions have run into major difficulties. As Caixin, China’s most respected business magazine, reported last week, many of the countries to which China had hoped to sell high-speed technology are now scaling back their plans “due to huge building and operating costs.”

Thailand has opted to shorten a planned, Chinese-built high-speed rail line over financing questions. Indonesia agreed to another Chinese project only after China agreed to build the line without Indonesian government money or loan guarantees. Mexico cancelled a Chinese high-speed rail project outright, ultimately citing budget constraints.

What Chinese leaders need to admit is that no other country is quite like China. California doesn’t have the same cost advantages. Indonesia lacks a government that can run up massive, unaccountable debts. Thailand rightly believes that slow trains are just as good as fast ones. Suggestions that rail has environmental benefits over other forms of transportation have merit, but only if the trains are running full. As China’s own example shows, many are not, and cannot thanks to low population densities along their routes.

This doesn’t mean high-speed rail is doomed outside of China. But if the world’s leading builder is having trouble making a business case for its systems, even with the benefit of government subsidies, that case probably isn’t very strong. What impressed visitors see now in China may not be the future after all.

*The author is an American writer based in Asia, where he covers politics, culture, business and junk.

Adam Minter
Log in to Twitter or Facebook account to connect
with the Korea JoongAng Daily
help-image Social comment?
lock icon

To write comments, please log in to one of the accounts.

Standards Board Policy (0/250자)