High-speed trains barrelling towards a financial precipice

PUBLISHED : Sunday, 23 May, 2010, 12:00am
UPDATED : Sunday, 23 May, 2010, 12:00am

'High-speed trains between Wuhan, in Hubei, and Guangzhou run at 350km/h. A standard one-way ticket for the three-hour journey costs 490 yuan, rising to 780 yuan for a deluxe seat.

'Although a ticket to travel more than 1,000 kilometres costs far more in Europe and Japan, many mainland residents, especially immigrant workers, would find 500 yuan expensive. Standard trains charge between 68 and 140 yuan for a hard-seat ticket from Guangzhou to Wuhan and up to 490 yuan for a soft-bed ticket.'

SCMP, May 21

Common sense about high-speed rail is beginning to assert itself on the mainland at last. A group of lawyers has complained that fares are too high and the relevant authorities have formally accepted the complaint.

They won't do anything about it, of course. The news lies entirely in the fact that the complaint was in some fashion permitted and we heard about it. This is notable in itself.

It follows a suggestion in March from Wang Mengshu, a key architect of this highly ambitious railway investment programme, that some of the trains running on the network might travel at lower speeds, which would allow lower fares to be charged on them.

Brilliant idea. Better yet, let's have these trains not move at all and then we can let people ride on them absolutely for free.

Listen, Prof Meng (well, of course, it had to be an academic who came up with this idea), it may take a bit more energy to push air out of the way with a high-speed train but the big cost is in the capital construction and all you will do by putting low-speed trains on a high-speed railway is clog the system.

Yet it is interesting once again to see some notion of the horrendous cost of high-speed rail finally getting through the skulls of the people responsible. We are talking here of a railway system that last year spent 700 billion yuan (HK$800.24 billion) in fixed-asset investment and expects that figure to continue rising.

I very much doubt that the high-speed portion of it really clears its costs on passenger fares, or ever will, not if full depreciation and heavy maintenance as well as full operating and financing costs are taken into account. I don't have the books to hand but that's my bet.

And I think the basic equation in the excerpt above has to be correct. Give migrant labourers, or even office workers, the choice of a three-hour journey between Guangzhou and Wuhan at 490 yuan or an eight to 10-hour journey at 68 yuan and they will go for the cheaper one.

In fact they may as easily go for the bus. As the chart below shows, the share of total passenger traffic going by rail on the mainland has fallen over the past 10 years and this decline has recently become more precipitous. People prefer the roads.

Of course the authorities in Beijing may say that it is now official policy to encourage rail. Very well, but then why slather the countryside in bitumen? The road length of highways is still rising by more than 10 per cent a year.

The long and short of it is that a dream-indulgent railway cabal in Beijing somehow managed to get official backing for a multitrillion-yuan high-speed railway network without ever doing proper feasibility, costing and passenger preference studies. The whole thing went straight from dream to engineering drawings.

I suspect that the most telling argument the cabal presented for going ahead with this money gurgler was something along the lines of, 'They figure they can do it in Europe, so why don't we do it before Europe does. That'll show 'em.'

Bit by bit the nightmare aspects of this dream are beginning to manifest themselves, however. What if this isn't what people really want? What if they are perfectly happy with some improvements on ordinary rail? What if we can't lay our hands on the money any longer?

Here is an idea for our bureaucrats in Hong Kong. You know that HK$66.9 billion you are meant to spend on the Hong Kong extension of this high-speed rail, fellas?

Well, why not just drag things out, take your time about letting the contracts, getting the land ready for construction, approving the environmentals, that sort of thing, you know.

I shouldn't have to tell you.

Every dollar you delay may be a dollar saved.