Safety Concerns to Slow Down Beijing-Shanghai High-speed Rail

May 23, 2011 Posted by China Briefing Reading Time: 4 minutes

Op-Ed Commentary: Vivian Ni

May 23 – China’s fastest long-haul railway line, the Beijing-Shanghai high-speed passenger designated line (PDL) that is designed to operate at 380 kilometers per hour, will be running at a lower speed of 300 kilometers per hour when it’s open for public operation next month, Sheng Gaozu, minister of China’s Ministry of Railways (MoR), recently told the Chinese media.

In sharp contrast with the country’s enthusiasm to speed up all of its high speed railway (HSR) routes, the new speed limitation decision is mostly based on safety concerns, according to the government. However, the quick policy shift has brought about the Chinese public’s reflection on the efficiency of China’s overall infrastructure investment.

China’s planning for the Beijing-Shanghai PDL started in 1990, together with the beginning of the country’s ambition for developing a national HSR network. Over the long 21-year period, the completion of the PDL construction only took the last three years, while the first 18 years were spent on feasibility debates, which largely raised the operational speed from the originally proposed 200 kilometers per hour to the current 380 kilometers per hour.

However, it is a bit too early to tell if speeds of 380 kilometers per hour are 100 percent “feasible,” as some Chinese experts have described the risk factor of a train running that fast as “very high.” Although safety concerns do seem to be a fair reason for China to decrease the operation speed now, the Chinese public wonders why such risks were not revealed during the 18 years of feasibility research.

The “late discovery” of safety issues did not prevent a massive waste of resources, a report on the Chinese business web site Caixin Online says. The spending on the railway and trains that meet the standard to operate at speeds of 380 kilometers per hour has already been fixed. In addition, China may need to spend even more on facility replacements to adjust the trains to the new speed limitation.

According to the Caixin report, the cost on infrastructure construction increases by at least one-third to meet speed changes from 200 kilometers to 350 kilometers. In some segments, due to geographical differences, the cost will even surge as much as two to three times. The speed-up campaigns have lifted the total investment budget on the Beijing-Shanghai PDL project to RMB220.9 billion in 2008, from the planned RMB168 billion in 2006.

The trains were also originally equipped with airline-style luxury seats and lie-flat beds, but the MoR has decided to scrap them for standard high-speed rail line passenger seats in order to keep down average ticket prices. However, the Caixin report pointed out that the re-equipping will only add more to the cost.

Li Hongchang, associate professor of Beijing Jiaotong University, also believes that operating at a lower speed will not reduce the fixed costs, though it does save on energy costs – trains that speed over 350 kilometers per hour can consume twice as much energy as those at lower speeds.

Another universal doubt on the HSRs is whether they will bring the expected returns after such grand investments on them. Over the past few years, faced with fierce competition from airlines offering large discounts and maintaining an obvious speed disadvantage, China’s railways are seeing decreases in both passengers and freight. From 2005 to 2010, the portion of travelers utilizing rail transportation has declined by 3.2 percent while the share of cargo being shipped by rail has gone down by 20 percent.

While the emergence of HSRs may have helped combat the speed disadvantage, it has also driven up ticket prices. Although the actual ticket pricing for the Beijing-Shanghai PDL has not been released, many Chinese people worry that the tickets are going to cost them almost as much as discounted air-tickets between the two cities. Besides, the recent speed change is estimated to add an extra hour to former claims of a four to five-hour travel time, slightly emphasizing the new line may still have a disadvantage in speed.

Because of all these above-mentioned factors, it remains to be seen if the new commercial HSR services will bring enough revenue to make all the investments worthwhile. The MoR reported a loss of RMB3.8 billion during the first quarter of 2011, and analysts predict that 2010’s unreleased losses may have reached RMB20 billion, due to the “rapid increase in operation costs.”

A recent commentary on China’s information portal Tencent says in a developing country like China that has a massive input on its infrastructure, taxpayers have the right to know how efficiently their money is being spent. The MoR has issued approximately RMB1 trillion in debt to finance the HSR construction from 2006 to 2010, and raised another RMB12.6 billion through equity offerings. An industry report by China’s Minsheng Banking Corp. issued in July estimates that the MoR’s debt ratio will grow to over 70 percent by 2012, from the current 56 percent, indicating the expansion of its debt financing is a bit too speedy.

The Tencent commentary warns such a high debt in a country’s key department will lead to massive bad loans in banks and exacerbate national inflation at the end of the debt maturity period, which will come around 2014.

China has more than 90,000 kilometers of HSR lines, and plans to lay another 30,000 kilometers by 2020. Although investment in infrastructure is absolutely necessary, a nationwide HSR presence should bring more to the table than just giving the country bragging rights. Infrastructure input is a critical contributor to China’s rapid GDP growth, but the country should consider the efficiency of its investments and make its planning more transparent to taxpayers. The government should make the public aware of multiple types of spending to avoid waste, including potential costs generated from settling people whose houses are demolished during railway construction, as well as operating idle rail lines as a result of duplicated construction in some areas.

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