A career that went off the rails

In the weeks leading up to the Lunar New Year in early February, Liu Zhijun was busy riding China's rails, inspecting the network ahead of the peak period for heavy traffic. Then, on February 12, his career as head of the country's railways system came to a screeching halt.

At about 6pm that day, authorities announced that Liu (pictured above) was under investigation. A mere four hours later, Sheng Guangzu, a former top customs official, was in the engineer's seat at the ministry and presiding over a meeting outlining new leadership priorities. For Liu, that fateful winter Saturday marked an ignominious end to a railway career that spanned a quarter of a century, cresting with his appointment as minister of railways in 2003. It's unclear where Liu is now or exactly what brought him to ground, but it's widely assumed to be corruption.

What is clear is that he left one of the world's biggest rail networks vastly larger, but saddled with borrowings that added to China's mounting public debt.

'Catching Liu is good public relations for the Chinese government,' which wants to be seen rooting out corruption, says Bo Zhiyue, a mainland academic who is now a senior research fellow at the East Asian Institute of the National University of Singapore. Liu's downfall, he said, was probably brought about by twin catalysts: discord within the Ministry of Railways and a struggle for power inside China's top leadership, which is due for a reshuffle in 2012.

Liu's power base appears to have been Wuhan, the capital of his home province of Hubei. Originally, China's first long-distance, high-speed rail service was to have linked Beijing and Shenyang , an industrial centre in northeastern China, Bo says. But that honour instead went to Wuhan, when the 968-kilometre Wuhan-Guangzhou link opened in December 2009.

Making Wuhan part of the first high-speed rail service riled some railways officials, Bo says. So did Liu's tendency to promote foreign suppliers of railway equipment, such as France's Alstom and Germany's Siemens, over local ones, partly to get the technology transfer.

According to Bo, Liu was a protege of former railways minister Han Zhubin, who in turn was a protege of former Chinese president Jiang Zemin . Han worked in Shanghai's railways bureau, where he got to know Jiang, who was then mayor and later Communist Party secretary for Shanghai, where he was instrumental in getting Han appointed minister. The sacking of Liu appears to be part of a power struggle among China's top leaders against the lingering influence of Jiang, Bo says.

Victor Shih, an associate professor of political science at Northwestern University in the United States, agrees: Liu's 'downfall suggests some degree of power play at the very top level', he said. During Liu's tenure as China's railways chief, the ministry earned a reputation for escaping many of the reforms aimed at overhauling the Chinese government.

'When Liu was minister, what he said went,' says Zheng Tianxiang, a transport professor at Sun Yat-sen University in Guangzhou. 'It was difficult for the law to curb him.'

Liu spearheaded China's multi-billion yuan catapult into high-speed railways. The rapid expansion to lay more than 8,000 kilometres of track, making the world's biggest high-speed rail network, earned him the moniker 'Leaping Liu'.

Meanwhile, the ministry has been slimmed down. For instance, it used to operate its own large police force, but the central government has been transferring railway security work to the country's regular police force, says an official close to the railways ministry. The ministry also ran its own law courts, but these, too, are in the process of being absorbed into the national judiciary.

The ministry has been trimming its headcount to become more efficient, the official said, but that still leaves about 2 million employees.

When Liu lost his job on February 12, it happened in two stages. First, he was kicked out of the all-important post of the Communist Party's railways secretary for what both Xinhua and People's Daily websites called a 'severe violation of discipline', often code for corruption.

A few days later, on February 25, Liu was officially stripped of his ministerial position. It was only the second time since 2003 that a cabinet-level official had been dismissed. The other was Tian Fengshan , then minister of land and resources.

Others have since been caught in the corruption net, including Zhang Shuguang, the second-most senior engineer in the railways ministry and a pioneer of Chinese high-speed technology. He is being investigated for 'severe breach of discipline'.

Outside the ministry, a businesswoman named Ding Shumiao from Shanxi province, who supplied equipment to the railways, was arrested in Beijing in January.

On the night Sheng took over as head of the railways ministry, he called a 10pm emergency meeting to launch a safety review of China's entire railway network. (In April, the ministry claimed it had found 68,634 safety problems, solved 98 per cent of them and had 1,169 left to go.) Sheng also called for the entire ministry to 'closely unite under President Hu Jintao ', and pledged to weed out corruption, according to the Ministry of Railways' website.

The big projects are being scaled back. In April, Beijing said it was trimming the planned rail construction in its latest five-year plan. Sheng said the government would spend 2.8 trillion yuan (HK$3.36 trillion) on railways construction through 2015 (including high-speed rail but excluding rolling stock), Xinhua said. That is slightly lower than an earlier official projection of 3 trillion yuan, although still 41 per cent higher than the previous five-year plan.

In early May, following disclosure of a rare pre-tax loss of 3.7 billion yuan in the first quarter of this year, the ministry said it would cut the construction budget for 2010 by 14 per cent, to 600 billion yuan.

Sheng also pledged to slow trains down - a move meant to conserve energy and trim ticket prices. Customers will get choices of service at three speeds. For instance, when the new Beijing-Shanghai high-speed service gets going in June, it will offer a 300km/h train and a less expensive 250km/h fare.

The budget cutbacks have implications for foreign suppliers as well as several listed Chinese companies, including China Railway Construction Corporation (CRCC) and China Railway, which together control more than 80 per cent of the mainland's railway construction market. Both companies, which are traded in Hong Kong and Shanghai, announced sharp drops in railway contracts in the first quarter of this year and hinted at more to come the rest of this year.

Since Liu was dismissed, the share price of both companies has dropped more than 25 per cent in a slightly weaker Hong Kong market.

Meanwhile, China's official media have changed their tune on high-speed rail. In December they trumpeted a world speed record - 486.1km/h - set by a train made by Chinese maker CSR Corp. But now they criticise high-speed projects, and have revealed that farmland was taken illegally for railway and road projects.

Questions are mounting over the economic justification for some high-speed rail projects.

In late March, the government's mouthpiece, People's Daily, described a high-speed rail project under construction in Liaoning province that will connect the city of Dandong on the North Korea border with the provincial capital of Shenyang as 'an extremely big waste for the nation'.

800m

The amount, in yuan, that Liu Zhijun is accused of taking in kickbacks on contracts linked to expanding the high-speed rail network