Tag Archives: Liu Zhijun

Ex-Railways Minister Liu Given Suspended Death Sentence

The corruption trial of Liu Zhijun, the disgraced former railways minister who dipped his hand deep into the honeypot of China’s rapid expansion of its high-speed rail network, has been overshadowed by the Bo Xilai affair. Yet it is arguably a purer test of President Xi Jinping’s stated intention to crack down on corrupt officials as it doesn’t carry any of the political theatre of the Bo case.

Liu becomes the most senior official to be sentenced since Xi came to power, though the investigation and arrest of the 60-year old former railways minister predates that. A Beijing court convicted Liu of accepting 64.6 million yuan ($10.5 million) in bribes between 1986 and 2011, though this Bystander suspects that isn’t even the half of it. By some estimates 3% was skimmed off China’s 2 trillion yuan buildout of its high-speed rail system.

Liu’s sentence of death with a two-year reprieve is effectively a life sentence. Sufficient deterrent, not just for what Xi called the powerful “tigers” but also for the low-ranking “flies” that the anti-corruption drive is targeting? More cases of both kinds being brought to court would help, but institutional reform is needed to break the systemic grip of graft.

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Party Expels Former Railways Minister Liu Zhijun

Disgraced former Railways minister Liu Zhijun has been expelled from the Party for corruption. He is also taking the fall for the extensive corruption and mismanagement throughout China’s sprawling railway system.

Xinhua reports:

Investigators found Liu used his position to seek huge illegal interests for Ding Yuxin, chairman of Beijing Boyou Investment Management Corporation, maneuvering which caused great economic losses and negative social influence, according to a statement issued by the CPC’s Central Commission for Discipline Inspection (CCDI).

The CCDI also discovered Liu, who the statement labeled “morally corrupted,” had taken a huge amount of bribes and bore the major responsibility for severe corruption in the railways system.

Liu was removed from office in February last year. He will now face criminal charges which carry a lengthy jail term and possibly a death sentence.

The rapid expansion of China’s high-speed rail network has had the bloom taken off it by massive fraud, waste and mismanagement. The Railways Ministry’s all-encompassing control of the system–alone among the world’s largest railways, it makes policy, builds and owns the infrastructure, operates the services and regulates the system, which stands alone from all other forms of transport–is starting to be undone. Last month, plans to allow more private investment into the system were announced, a first step to breaking up the ministry. This would separate the infrastructure from operations, but not go as far as a World Bank proposal to put railways under a new transport ministry.

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An Indian Lesson For China’s High-Speed Railways

An interesting tidbit from our man in Delhi who says that the 7/23 Wenzhou train crash has struck a particular note there as India evaluates where to build its first high-speed passenger rail line.

For all its extensive rail system and extensive railway exports to elsewhere in Asia and Africa, India has been cautious about committing the considerable financial resources that are needed for such projects. But what caught our ear was our man’s description of how public the debate has been in India over high-speed rail and how independent the assessments of the feasibility of the competing projects have been.

That stands in marked contrast to the experience in China. We read daily of how former railways minister, Liu Zhijun, now removed from office and under investigation for corruption, forced through his plans to build out rapidly China’s high-speed rail network, regardless of expense, brooking no opposition and freezing out critics who said he was sacrificing safety for speed.

In the mid-2000s, our man tells us, when India’s railway ministry proposed a high-speed passenger line from Mumbai to Ahmedabad, the government had it reviewed independently by a state-owned transport consultancy, which decided the project was not economically viable as a passenger line, given India’s state of development, but could be beneficial to the country as a freight line, so the passenger plan was scrapped. No cosy arrangements there.

India’s latest effort in this area was announced last year by then railways minister, Mamata Banerjee, now chief minister of West Bengal, who proposed six possible lines. These the government has had studied over the past year by international consultants, with a choice expected shortly of which will be first to be built. The cabinet is also proposing to set up an independent agency that will monitor the implementation of whichever line is chosen.

How fast the trains will run has also been a matter of debate. Many in the railways ministry wanted to start slow, 200 km/h-250 km/h, though there has been some political pressure to go faster, 350 km/h, to show that India can bridge the technology gap as Japan has done and China had appeared to have before the Wenzhou crash confirmed the worse fears of critics.

Now, India has no high-speed passenger rail lines and China has the world’s largest network at approaching 10,000 kms. But, had China’s high-speed plans had the transparency, scrutiny and accountability that occurred in India, not only might the railways ministry not have debt of 1.25 trillion yuan ($194 billion) but the Wenzhou tragedy may never have occurred.

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Two More Rail Officials Said Snagged In Corruption Probe

The corruption investigation into China’s railways has reportedly snared two more senior officials. Caixin says that Shao Liping, chief of the Nanchang Railways Bureau Chief, and Lin Fenqiang, his counterpart at the Hohhot Railways Bureau, have been detained by authorities for questioning and removed from their posts.

What remains to be seen is whether Shao and Lin are connected to Liu Zhijun, the former rail minister who was the driving force behind the rapid expansion of China’s high-speed rail network and who was sacked in February, the first domino to fall as a result of the corruption probe. Liu is still under investigation, according to a senior Party official from the Central Commission for Discipline Inspection, as safety concerns about the high-speed lines persist.

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China’s Railways Said To Sacrifice Safety For Speed

Former railways minister Liu Zhijun sacrificed safety in pursuit of China having the world’s fastest high-speed trains, according to the ministry’s former deputy chief engineer, Zhou Yimin. In an interview with the 21st Business Herald (via Caijin), Zhou claimed that Liu overrode contract specifications by the German joint venture manufacturer, Siemens, that the trains’ top speed should be 300 kph because he wanted them to run at 350-380 kph.

Liu, the driving force behind the rapid buildout of the country’s high-speed rail network, was sacked in February following a bribery and corruption investigation. Test runs on the flagship line between Beijing and Shanghai concluded last month, but safety concerns persist, including around the settlement of the tracks, the trains’ brakes and the signalling and communications system along the line. Zhou says that there are often glitches with the trains on the high-speed network, but these are kept quiet. Several times trains on the Beijing-Shenyang have broken down, he says. Speed limits have been imposed on the whole network, in part as a cost saving measure.

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More Signs Of Slowing High-Speed Rail Buildout

The railway ministry’s tepid denial of an Economic Observer report that the ministry is having 29% of its infrastructure budget for the year cut suggests to this Bystander that planned new high-speed rail projects that have not yet started will not go ahead. The ministry said only that the publication’s report of a $200 million yuan cut in its 700 million yuan of planned spending was an inaccurate number.

Slowing the helter-skelter expansion of the network would fit with railways minister Sheng Guangzu’s publicly expressed view that priority should be given to new projects that either met a priority economic development need or filled a gap in the network where lines would benefit from being linked up. Sheng’s approach stands in contrast to that of his scandal-plagued predecessor, Liu Zhijun, who was overseeing a rapid build-out of the country’s high-speed network before his sacking in February. Of the 70 new projects in the offing for the year before Liu’s removal, 15 were high-speed lines.

There is no suggestion that railway projects underway would be halted or cut back, despite widespread concerns about the debt the rail system is taking on. However, Sheng has already proposed slowing high-speed trains’ speeds to lower operating costs. He now seems to be send new projects down the same track.

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Making China’s High-Speed Rail Network Viable

A tip of this Bystander’s hat to David Wolf’s Silicon Hutong analysis of high-speed rail development in China, now the subject of some scrutiny in the wake of the bribery and corruption scandal around sacked railways minister Liu Zhijun. High-speed rail, Wolf argues, is particularly suitable for a country where “the distances between city pairs are too great or too traffic-laden for taxi, bus, or personal automobile, and are too near to justify air travel.” China’s urbanization and development plans will only increase the number of city pairs and city clusters for which high-speed rail connections will be viable.

The danger, Wolf says, is in applying high-speed rail as the answer for all of China’s transportation needs. What critics should focus on is “less Chinese high-speed rail qua high speed rail, but on factors that threaten the success and viability of the system.”

What the government needs is some systemic sobriety to counter the early intoxication with high-speed rail. Because of the fixed, inflexible nature of high-speed rail’s assets (as opposed to, say, those of an airline,) a good start would be creating a framework against which the National Development and Reform Commission  can evaluate the economics of a given line over the long term. Clearly the success of the early lines suggest the beginnings of such a template: Beijing to Shenyang, yes, Beijing to Urumqi, probably not.

Railways are simultaneously an economic activity and a public good, which means that a binary choice between them being “profitable” or “social” is the wrong way to look at their cost. That is anyway complex. More rail means less need for roads, less need to expand airports, less need for medical services to treat victims of road accidents, less loss of lifetime economic output from accidental deaths, more efficient energy use, lower carbon emissions, even the civic benefits of people coming together without cars, none of which fits neatly into a one-year budget or even a five-year plan.

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China Presses On With High-Speed Rail

It appears that it is full steam ahead for China’s high-speed rail network despite the bribery and corruption investigation around sacked railways minister Liu Zhijun. His replacement Sheng Guangzu says development will continue to plan. Shen also said that the ministry’s affiliated railway companies were holding 1.8 trillion yuan ($275 billion) in debt, which amounts to 56% of their assets–within “the safety zone”, according to Sheng. That said, the bank regulator, China Banking Regulatory Commission, has told banks to review their lending to high-speed rail projects.

Footnote: Our man in New York reminds us that America’s railway building boom in the 19th century, and particularly the transcontinental Union Pacific Railroad, was afflicted by bribery and corruption. The most notorious incident was the Credit Mobilier of America scandal in the 1860-70s in which 13 members of the U.S. Congress were implicated.

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China’s Railways Corruption Probe Widens

The inquiry into alleged kickbacks around the construction of China’s high-speed-rail network has expanded with Zhang Shuguang, a close aide of disgraced former railways minister Liu Zhijun, being sacked as deputy chief engineer at the ministry and placed under investigation. The 55-years old Zhang was closely identified with the rapid expansion of the high-speed-rail-network. We suspect he won’t be the last railways official to be fingered.

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The 3% Skim Off China’s 2 Trillion Yuan High-Speed Rail Network

The web of corruption surrounding disgraced former railways minister Liu Zhijun was widespread and drew in equipment suppliers and middle- and high-level officials, Caixin reports. The publication also says that Ding Shumiao, the businesswoman whose own corruption investigation led to the detention of Liu, skimmed off at least 800 million yuan ($122 million) in kickbacks from railway equipment supply contracts as a result of her connection of Liu.

It says that the practice of companies giving middlemen, such as Ding, a “commission fee” for help in winning contract bids was commonplace. It quotes one such arrangement in which “a large state-owned company gave Ding Shumiao…about 100 million yuan.” The fee would have been routed via a private sub-contractor and was said to be 3% of the total value of the project. Given that China is spending 2 trillion yuan on developing its high-speed rail network that works out at potentially a sizable chunk of change going to commission fees.

Update: Caixin has posted an English translation of its investigation.

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