More Fraud Turned Up On China’s High-Speed Rails

High-speed trains start commercial service on Beijing-Shanghai run

This Bystander is not so much shocked as wearied by the latest revelations of embezzlement from China’s scandal-plagued high-speed rail network. The National Audit Office says that a second audit of the Beijing-Shanghai line, the centerpiece of the country’s rapid expansion of its high-speed rail network, has found that 491 million yuan ($78 million) has been skimmed off the project by “irregular practices in the construction and management”.

A first audit conducted in 2010 revealed that 187 million yuan had been stolen from the project, which went into commercial operation last June. The picture above shows the first southbound train nosing its way out of Beijing South station, carrying prime minister Wen Jiabao, who inaugurated the service on the 1,318-kilometer now five-hour journey. We are not clear if the latest number tops up the first audit or is in addition to it, but either way it is a tidy sum. The money seems to have been lifted from several pots: the compensation fund for residents whose homes were demolished to make way for the tracks; 413 million yuan of cancelled contracts for wind-shielding barriers that somehow still got paid out in part; 849 million yuan of procurements not carried out in accordance with the standard bidding process; and accounting practices that seem to have no problem with processing fake invoices.

In all, it has been estimated that 3% of the 2 trillion yuan China has spent on building its high-speed rail network  has been skimmed off one way or another. The rush to build not only created a giant honey-pot for contractors, suppliers and middlemen, but also one that was’t closely scrutinized. It has subsequently triggered allegations that safety, too, was sacrificed in the cause of speed, both of the trains and the pace of the network build-out. The consequences continue to reverberate. Earlier this month a section of track in Hubei collapsed, apparently because inferior materials were used in the construction of embankments.

The new Beijing-Shanghai audit also says that the company that built the line owes more than 8 billion yuan to suppliers and construction workers. Then railways minister Liu Zhijun was sacked in February 2011, a month before the announcement of the results of the first audit. It has since become clear that corruption surrounding the building of the high-speed rail network spread a long way down from the highest levels. Some officials of the Beijing-Shanghai High-Speed Railway Co. Ltd., and their suppliers, are, no doubt, now looking nervously over their shoulder.

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4 Comments

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4 responses to “More Fraud Turned Up On China’s High-Speed Rails

  1. cindy Hoong

    I shared the same view as this blog .. I am not surprised of the findings. What I find good is, many foreigners, seems to ooh and aah about how fast in China something can be done and built with a blink of an eyes … some of them complains there are too many red-tapes in the western world. My argument has always been red tapes are pain, BUT in many cases are generally good … personally I think there is always corruptions no matter where you go, but in China corruptions know no bounds. And by slowing down with red-tapes tend to slow down corruptions as well. No quicky bucks!

  2. China Bystander

    Cindy, I know you read our post on why China can build infrastructure such as high-speed rail lines so quickly as you commented on it, but for any reader who hasn’t yet, here is a link: https://chinabystander.wordpress.com/2012/02/16/building-chinas-railways-that-was-quick/

    To your corruption point, having an omnipotent railways ministry helps speed the process of building railways but it means there is not an independent watchdog to ensure that due process gets followed. The nearest agency to performing that role is the National Audit Office, and that comes along long after the event. Without impartial oversight, as you indicate, corruption can flourish. And to our mind, it doesn’t just flourish, it becomes systemic. — CB

  3. cindy Hoong

    Checked-and-balanced. A very important step that gone missing. Talk about project management principles! I was there for a very small and unimportant project. Saw how my Chinese team seems prone to cut corners. Something that I totally disagreed and resulted in constant tug-of-war.

    I supposed at the end of the day, this ‘failures’ will have many heads right to the VERY TOP? I supposed some of the politicians must be wondering if it were such a good idea to open the Bamboo-curtains so widely after all?

  4. Pingback: China rail ministry lost $1.1 billion in first-quarter: report « China Daily Mail

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