High-speed railways are understandably attractive to China's leaders: inter-city travel is quick and comfortable, jobs are created, the environment fares better than with highways and a grand statement of technological prowess is made. For all the perceived benefits, though, the headlong rush to build tracks is monumentally expensive. Investors cannot be guaranteed returns on some routes and other transport sectors suffer financially. The mounting problems highlight the flaws of a government that makes decisions in a closed loop without a genuine legislature and independent oversight. Beijing made high-speed railways the infrastructure focus of its financial stimulus package in 2008. The aim is to build a network of 18,000 kilometres, an ambitious move given that such lines cost three times as much as conventional tracks. Aspirations on this scale have a considerable financial downside; spending soared 78 per cent last year to 600 billion yuan (HK$681 billion) and will rise a further 17 per cent to 700 billion yuan this year. The Ministry of Railways' total debt will be raised to three trillion yuan by 2020. As daunting as such numbers may be, authorities believe that the benefits outweigh the costs. An announcement of an initiative to accelerate the speed of the network build-up is expected at the National People's Congress, which starts tomorrow. This is despite a tougher policy towards bank loans and the government tightening credit. In anticipation, there has been a noticeable increase in criticism of high-speed rail travel, particularly from the airline industry. Airlines, already cash-strapped, have a right to be worried: Europe's high-speed rail network was the death knell for short-haul flights between cities. Many of the flights between Guangzhou and Wuhan have stopped since the three-hour high-speed train went into service in December. A number of cancellations are likely when the line between Beijing and Shanghai is completed in 2012. For all the convenience, though, trains that travel up to 350km/h have been proven to lose competitiveness with airlines at distances of more than 1,000 kilometres. Planes become cheaper and quicker. Such facts have been lost by Hong Kong officials trying to sell to citizens the HK$66.9 billion high-speed rail link with the mainland's network as a good way of travelling to Shanghai and Beijing. The railways ministry is stepping up reform of its financing system. A centrepiece will be the listing on stock exchanges of joint-stock railway companies. Ways around massive funding shortfalls of the Beijing-Shanghai line are hoped to be found in its listing in coming months - even though it will not be completed for two years. Historical lessons for investors of the pitfalls of such a strategy abound. Railway booms in the US and Britain in the 19th century led to profits for some, but heavy losses for most. More recent, though, was the bursting of the dotcom internet speculation bubble. In the late 1990s, companies that had little more than an idea to offer were listing and their shares traded for ever-higher prices. When reality dawned a decade ago - as happened with Li Ka-shing's Tom.com - prices collapsed and fortunes were dented or lost. Railways were important to the development of the US and Britain, just as the internet is for society now. Regardless, there are not any guarantees of returns for China's massive high-speed rail outlays. Infrastructure on such a scale has to be carefully planned. The only environment in which this can happen properly is one in which the government is transparent and answerable to citizens, and there is open thought, analysis and observation.
