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China’s High-Speed Rail Network: Getting There

A new paper published by the World Bank’s Beijing office has taken stock of China’s controversial and at times trouble-plagued high-speed rail network three years on from its start just before the Beijing Olympics in August 2008.

The authors, Richard Bullock, Andrew Salzberg and Ying Jin, find that, as in other countries, high-speed rail competes strongly on short and medium-distance routes (up to 1,000 kms). It has taken passengers from bus travel and from airlines’s shorter routes, but is not chewing into air travel for longer distances.

However, the gains to high-speed rail from both of these rival means of transport are dwarfed by the size of the new traveling public it is finding. The authors estimate that at least half of those traveling on high-speed services are new travelers, attracted by the convenience of the fast services. It should be noted that services have been reduced on conventional lines paralleling high-speed ones, in some cases, severely. Overall though, the authors say, high-speed rail has expanded the demand for rail travel despite being relatively expensive. High-speed carried 290 million passengers in 2010, a 17% share of rail travelers, they estimate. China’s high-speed trains are already carrying more passengers than the French TGV and are rivaling the volume on Japan’s Shinkansen.

Their findings leave the authors optimistic about the long-term ridership, and hence economic viability, of high-speed rail in China. Their bullishness is tempered, though, by the need to develop sustainable financing in the short to medium term and to weigh carefully the costs and benefits of proposed extensions of the network (see map below).

China has invested an estimated more than $300 billion on high-speed rail and the system has had well publicized financing problems. The authors say:

Very little information is publicly available on the financial performance of the HSR network. There seems little doubt, based on experience elsewhere and evidence collected in China, that most lines, except possibly isolated lines like Zhengzhou to Xian and Jiujiang to Nanchang, are covering their immediate cash costs (rolling stock and infrastructure operations and maintenance costs). The next important financial hurdle for any railway is its ability to cover its interest payments on debt, and it is likely that some of the better-performing services (with densities of 10-15 million passengers) are already doing that.

Covering interest payments is not the same thing as making a profit, let alone enough of one to repay the principal on its debt. Few high-speed lines anywhere in the world manage the latter. Most of China’s will probably have to have their debts rescheduled or forgiven one way or another. They are likely to find state-owned lenders accommodating, though to what extent will depend on the state of their bankers’ balance sheets at the time. An alternative would be to group the lines so the financially strongest can cross-subsidize the weakest. (Rail reorganization is a favorite theme of at least one of the authors, Richard Bullock).

China's High-Speed Rail Network, as of February 2012

High-Speed Rail Network, February 2012

*High-Speed Rail–The First Three Years, Taking the Pulse of China’s Emerging Program by Richard Bullock, Andrew Salzberg, and Ying Jin, World Bank Office, Beijing; China Transport Topics No. 04.


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