Tuesday, February 23, 2010

China's high-speed rail march

In its breakneck paced surge towards economic superpower status, China has been making massive investments in modernizing and expanding its infrastructure. One of the more remarkable successes is the development of high-speed railway lines (which average speeds of up to 215 miles an hour), on which China has surpassed the US and is fast catching up with leaders Europe and Japan.

There are 42 high-speed lines which have been recently opened or set to open by 2012 (the US hopes to build its first high-speed rail line by 2014!). The recently opened 664 mile Wuhan-Guangzhou high-speed line which has so many tunnels through mountains that at times it feels like a subway and which cost $17 billion to build cuts travel time from 11 hours to just three hours.

As the Times reports, the web of superfast trains have the potential to make China even more economically competitive, connecting the vast country as never before, much as the building of the Interstate highway system increased productivity and reduced costs in America a half-century ago.

Like in case of the power sector, the massive economies of large-scale production created by these investments have had the result of many Chinese companies emerging to take advantage of the rapidly expanding new market. It is only a matter of time before they assume global leadership position in the development of these equipments and technologies.

Like all else in the country's infrastructure, this dramatic expansion too has been largely top-driven. The government plans to shift much of passenger traffic into these high-speed lines and free up the existing lines for freight traffic. The global recession and a $100 bn infusion of the $586 bn Chinese stimulus spending has advanced the original plan for achieving the aforementioned objective from 2020 to 2012. The 42 projects include 5,000 miles of track for passenger trains at 215 miles an hour and 3,000 miles of track for passenger and fast freight trains traveling 155 miles an hour.

However, like with all the other massive infrastructure investments in China, this too has its share of criticisms - heavily subsidized investments, possible over-investment and redundancies in network, need to subsidize operating expenses (the ticket prices are kept well below the rate of recovery) and so on.

The comparison of these mega investments with Indian Railways is stark. In fact, the budgetary support for Railways for 2009-10 was just $1 billion and total Plan outlay at less than $8 bn for the year.

Update 1 (16/3/2010)
Times reports that the 520-kilometer (325 miles) high-speed rail connection — called AVE for Alta Velocidad Española — between Barcelona and Madrid, opened in 2008, has cut journey time from the previous six hours by car to just 2 hours and 38 minutes. Two years ago, nearly 90% of the six million people traveling between Madrid and Barcelona went by air, while early this year the number of train travelers on the route surpassed fliers. This also contributes to Spain achieving its commitment to lower its carbon dioxide emissions by 20% over 10 years. Analysts say that such emissions per passenger on a high-speed train are about one-fourth of those generated by flying or driving.

But unlike the French, who sought to maintain a low-cost image as their trains gained speed, AVE tickets cost as much as plane tickets — from about €120 to €200 one way, or $160 to $300, though cheaper advance fares can be found. The train offers assigned reclining seats, computer outlets, movies, headsets, good food, even gloved attendants.

Other AVE lines connect Madrid with Seville and with Málaga. The number of flights between Madrid and Málaga has dropped by half in the two years since the AVE route between those cities opened in 2007. Requiring fewer employees and far less costly infrastructure than do planes, all AVE lines turn a profit and have easily survived price wars waged by airlines.

Among rail's competitive advantage are the fact that their lines are closer to residential areas; rail tickets remind passengers to be onboard a mere two minutes before departure; the only security procedure involves passing large suitcases though a scanner etc. Adding to rail’s competitive advantage, European environmental policies will probably force an increase in airline ticket prices over the next few years, since beginning in 2012, the biggest polluters among the airlines will be required to buy extra credits to 'pay' for their carbon dioxide emissions, and the cost will have to be passed on to travelers.

Update 1 (10/4/2010)
As part of its efforts to become a big exporter and licensor of bullet trains traveling 215 miles an hour, the Chinese government recently signed cooperation agreements with the State of California and General Electric to help build such lines.

Though state-owned Chinese equipment manufacturers had initially licensed many of their designs over the last decade from Japan, Germany and France, with domestic experience they have gone on to make many changes and innovations and emerge as manufacturers on their own right.

Update 2 (25/8/2010)

The China Railway Group, a construction company, is in talks with South Africa’s government for a $30 billion, 352 miles high-speed rail project between Johannesburg and the eastern port city of Durban, that is expected to cut travel times from 5-7 hours to 3 hours. South Africa is hoping Chinese state-owned banks can provide loans for the project.

Update 3 (18/2/2011)

The NYT reports that the recent sacking of Liu Zhijun, chief of the Chinese Railways Ministry, for "severe violations of discipline", hints at corruption and dilution of safety and quality standards in China's light rail surge. Mr. Liu had led China’s program to lace the nation with nearly 8,100 miles of high-speed rail lines and to build more than 11,000 miles of traditional railroad lines. The sheer size and cost of the endeavor — the investment has been estimated at $750 billion, some $395 billion for high-speed rail alone — has led experts to compare it to the transcontinental railroad that opened the American West.

China’s high-speed rail network has been built far more cheaply than similar projects in the West and in Japan. A mile of rail here costs roughly $15 million; in the United States, estimates peg the price at anywhere between $40 million to $80 million. Despite its heavy use (passenger rail traffic leapt to 1.68 billion trips last year, up 9.9 percent from 2009) and high ticket prices (several times those for a conventional train), the high-speed network is expected to remain a money-loser for the next 20 years.

Mr Liu's push to speed up things has pushed the Railway Ministry's debt burden beyond an unsustainably high $170 bn. A 2010 analysis by China Minsheng Bank found that the ministry’s debts equaled 56 percent of its assets and could reach $455 billion, or 70 percent of its assets, by 2020. Mr. Liu recently began an aggressive program to deal with the debt by selling stakes in the railway to investors like large state-controlled banks.

Update 4 (14/6/2011)

Concerned at safety, authorities have decided to lower the travel speeds of the new light rail lines. As part of its fiscal stimulus spending, the Chinese government has developed or is developing nearly 8,100 miles of high-speed rail lines and some 11,000 miles of traditional railroad lines, at a cost of $750 billion.

A new line between Shanghai and Beijing will halve the 10-hour rail trip between the country’s great metropolises, but even the lowest ticket price of about $63 nearly equals the net monthly income for rural residents.


Srinivas Ghantasala said...

the graphic has said it all. yes, it's really breakneck speed there. they're thinking big and also fast. like three gorges.

Anonymous said...

Here is something about indian Railways