Ambassador (retd.) Kishan S Rana, Honorary Fellow, Institute of Chinese Studies.
On 11 July 2016 Mint carried the following commentary.
Mint, New Delhi
Just say no to high-speed rail
China has started to question the business case for high-speed rail, especially as an export to other countries
China’s rail miracle may have run its course—and may never be repeated elsewhere.
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 recent months, however, Chinese leaders have begun to question the business case for high-speed rail, especially as an export to other countries. The questions are a 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. At the same time, the government faced far fewer obstacles to building high-speed lines than countries such as the US do. Labour costs were low and acquiring land wasn’t difficult.
Even with these advantages, however, the costs have been considerable. In May, state-owned China Railway Corp., the operator of China’s rail network, reported that its debt had grown 10.4% in the past year and now exceeded $600 billion; in 2014, 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 travelled 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 Corp.
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”.
What Chinese leaders need to admit is that no other country is quite like China. 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. Bloomberg
Adam Minter is an American writer based in Asia.
Comment:
If China, which now has the world’s largest dedicated special line high-speed rail network in the world, extending to over 12,000 km, and is a technology leader in this field (after learning the ropes from its initial purchase of Siemens technology in the 1990s; the Germans complained that their proprietary knowledge was ‘pirated’ by China, but they perhaps considered it impolitic to pursue this, in order not to jeopardize economic relations, including future exports). China failed to win a major contract in Indonesia, losing out to Japan, but may be making headway in Mexico.
That China may rethink its business case for high-speed rail line construction, despite its deep pockets, plus its need to sustain infrastructure spending, is interesting. We might pause to rethink our policy in this area.
First, we face a resource scarcity that limits our capacity to build vital infrastructure. Can we afford to blow up some $10 billion and more for a new Ahmedabad-Mumbai link? Even a Japanese 50-year interest free loan has to be repaid, and does not cover all our own ancillary investments.
Second, our real need is to speed up both passenger and goods train speeds, even by an average of 10 of 15 KPH, if not more. The Spanish type of technology that permits existing track to be used for such improvements makes far more sense for India. And after all these years, where is Indian innovation in rail technology for such gradual improvements?
Third, is it not incredible that while the automotive sector, including the truck industry, has major political clout, Indian Railways, run with extraordinary inefficiency, employing around 1.2 million, is run into the ground. The net result is that unlike China and other comparable large countries with a vast national rail network, India has one of the world’s lowest ratios of rail-to-road cargo traffic. Is that really being addressed? The social cost of the current pattern of road movement of goods traffic, vs. more intensive use of railways, is so much higher, for the environment, and in terms of ancillary costs.
These are some thoughts that emerge on reading the story that China is rethinking its high-speed rail policy.