China railways scandal widens, raising criticism

[StingRoy]

China railways scandal widens, raising criticism

SHANGHAI – A widening probe into corruption in China's powerful Railways Ministry is raising questions over the scale and pace of its multibillion-dollar drive to build costly high-speed railways, though it is unlikely to derail the program.

Along with concerns over financing and other issues, at least one proposal for scaling down the showcase program is due to be presented to a top advisory group meeting in Beijing this week during the annual session of China's National People's Congress, a state media report said Wednesday.

Critics of the high-speed railways expansion say ticket costs are too high and the services do not really meet the needs of average travelers in many areas.

"Railway development plans should be more down to earth and take into account what people really need," Wu Youying told the Shanghai Daily. Wu is a member of the advisory group, the Chinese People's Political Consultative Congress.

While Wu's proposal will likely gain little traction given the resources invested in high-speed rail, the corruption investigation is a blow to the program, which until recently has rivaled China's space efforts in terms of national pride and importance.

The scandal surfaced last month with the dismissal of Railways Minister Liu Zhijun amid allegations of so-far unspecified "severe violations of discipline." Reports in the financial news magazine Caixin Media and other local media say the allegations involve kickbacks, bribes, illegal contracts and sexual liaisons.

Dismissals of top Communist Party officials are rare, since they can damage the party's credibility among a public already jaded by widespread graft. But the current leadership has sought to burnish its image with various cleanup campaigns.

In the latest development, Zhang Shuguang, an engineer in charge of research and development of the country's high-speed railways, was removed, also for alleged but unnamed disciplinary violations, the official Xinhua News Agency announced late Tuesday.

Zhang oversaw innovation of China's high-speed rail technology, according to an earlier Xinhua report that quoted him describing his triumphs in negotiations with foreign companies.

"Our strong point is that Chinese producers are united to form a 'China corps,'" Zhang said.

The same epic account cited Liu, the ousted railways minister, as likening the country's high-speed railways to "dragons in the sky."

The concerns over the railway program are not limited to corruption.

The country's 56,400 miles (91,000 kilometers) of passenger railways are the world's longest and, in some cases, the fastest, but are still working beyond their capacity.

China will spend 700 billion yuan ($106 billion) in railways construction this year, railway officials say, as it works toward its goal of having 8,060 miles (13,000 kilometers) of high-speed rail in place by the year's end.

The costs are raising worries over financing. Major state-owned railway and railcar building companies with shares listed in Hong Kong and Shanghai increasingly are relying on bonds and bank loans to finance projects, with onerous repayment obligations that may be difficult to meet given the revenue projections for many projects.

Annual interest payments on loans for a high-speed rail link between Beijing and the nearby city of Tianjin, for example, will fall short of the line's annual revenues. Other lines face similar woes, the financial magazine Caijing reported, citing Zhao Jian, a professor at Beijing's Jiaotong University.

"It seems that political impetus, rather than market needs, lies behind China's railway frenzy," said a recent commentary in the Chinese newspaper Global Times, describing the boom as "incredibly risky."

The speed of construction has some experts asking about safety issues, but the top gripe among critics of the program is that the emphasis on bullet trains is coming at the expense of slower but more practical services.

Despite the increasingly public criticisms over the high-speed rail program, it is unclear what impact the scandal will have on future and current projects. They include a 870 mile (1,400 kilometer) high-speed link between Beijing and Shanghai, the country's commercial capital, that is due to open in June.

China, meanwhile, is going head-to-head with global rivals like Siemens, Japan Railways and Bombadier and winning overseas contracts, among them a recent $13 billion deal to build eight railway lines in Iran and plans for joint construction of a high-speed railway in Kazakhstan.

 

[StingRoy]

Full steam ahead on China's high-speed rails

A wave of doubt and criticism of China's ambitious high-speed railway plans have surfaced lately.

Last week, the Global Times published an article by Ye Tan, a financial commentator, "Transportation boom set for financial bust," that essentially points to two arguments challenging the strategic plan of Ministry of Railway (MOR).

Ye argues that high-speed railway is too fast, too costly, way ahead of its time and not sustainable over the long run. She also claims that the debt ratio at the MOR is so high that in the next two to three years it is likely to run into insolvency in servicing its debt.

Let me first address the second argument, which is easier refute. The MOR's debt-to-asset ratio right now stands at a bit over 50 percent. Although it has steadily climbed higher over the years, this level of debt ratio is well within the safety margins compared to many other providers of public infrastructures of such large scale.

Financial analysts who make a living following companies like Microsoft and Google are destined to be disappointed with public transportation companies, where earnings are mediocre, debt-to-asset ratios are high, and investment payoffs take a long time to materialize.

Just look at China's three largest airlines, Air China, China Southern Airlines, and China Eastern Airlines. Their debt-to-asset ratios are all around 90 percent, and yet they are still solid companies delivering decent earnings year after year.

The MOR's net profit margin has been around 10 percent for the last three years. And I do have a complaint about that - it's too much. There is no reason for a State monopoly to reap in such high profits. The MOR should lower its fares to benefit the public.

The MOR is a cash cow, being the only player in town in the railway business. The prospect of it running into insolvency is total nonsense. In the worst case, even when the MOR has a short-term cash flow problem, the Chinese government won't stand by and watch it go down.

Public transportation has many other economic benefits that financial analysts usually don't understand, including facilitating inter-province trade of goods and services, regional economic integrations, and stimulus functions to create jobs and economic activities.

The overall economic impact can't be seen just from cranking out ratios from the MOR's balance sheets and income statements. Therefore it is not unusual for the State to subsidize such public transportation rollouts.

When it comes to constructing high-speed rail, no country so far has relied entirely on the private capital markets. The Obama administration has already allocated billions of federal money for high-speed railway development in the last two years.

This leads to the issue of whether China's high-speed railway projects are ahead of its time and have become too expensive for the public to bear. Some analysts have used the mediocre financial performance of the Beijing-Tianjin line as a basis for asserting the lack of demand for such high-speed service.

Speed is indeed costly. High-speed railway tends to have a sweet spot of operation in terms of traveling distance - usually between 200 kilometers to 1,000 kilometers. Even though the Beijing-Tianjin line falls short of this range, it has still earned a positive cash flow within two years of opening service, with an occupancy rate above 70 percent.

The Shanghai-Nanjing line's occupancy rate is even above 100 percent, meaning there's more demand than seats available. Judging from these encouraging statistics, one has every reason to believe that newly opened high-speed railway lines will continue to deliver solid ridership statistics.

It is understandable that some citizens with lower incomes will lament the disappearance of slow but cheap green trains and minority is vocal about it. The silent majority, however, are already voting with their wallets.

 

[StingRoy]

Is it time for the Chinese railways to slow down and focus on reducing costs for their railways? Above all do a cleanup of the people involved.

Too fast too soon?

 

[CardSharp]

Is it time for the Chinese railways to slow down and focus on reducing costs for their railways? Above all do a cleanup of the people involved.

Too fast too soon?

China takes the long view. Short term profitability is a small consideration when you're trying to build a petro-independent economy. Costs will come down and the relative advantages over 10, 20 years is obvious.

http://www.defence.pk/forums/china-defence/96498-chinas-next-five-year-plan.html

I Above all do a cleanup of the people involved.

It was just a limited case involving just him and that guy has been sacked. His mistress was the PR person for one of the Chinese companies and this swayed his decision on one of the contracts. (still a capable company, just played dirty)

 

[StingRoy]

China takes the long view. Short term profitability is a small consideration when you're trying to build a petro-independent economy. Costs will come down and the relative advantages over 10, 20 years is obvious.

I agree there are relative advantages in the longer term... thats why I said "too fast too soon". My concern is that the normal people are being left behind as the normal trains have been replaced with HS trains. Waiting lists are increasing for the immigrant families wanting to visit their home during the holidays. Would this not fuel discontent amongst these people?
Since the HS lines are separate why is there a reduction in normal rail service catering to the commoners as before? Is the MOR trying to maximize its profit by trying to move people from the normal service to HSR?

It was just a limited case involving just him and that guy has been sacked. His mistress was the PR person for one of the Chinese companies and this swayed his decision on one of the contracts. (still a capable company, just played dirty)

I think it was fairly reasonable and house needs to be cleaned up. But the investigations are not over yet, so we can't say how many more are involved.

 

[no_name]

A smart and self disciplined official would avoid mistresses like a plague. When you become involved in this kind of affairs your career can only go downwards. I'm glad he is rooted out before he gets an even important position.

 

[CardSharp]

A smart and self disciplined official would avoid mistresses like a plague. When you become involved in this kind of affairs your career can only go downwards. I'm glad he is rooted out before he gets an even important position.

Oh he is done.

 

[Kevrai]

All aboard for China's fast-track future?


Beijing (CNN) -- As Chinese New Year approaches, hundreds of millions of people have already begun long journeys back to far-flung provinces across China to celebrate with their families.

The journey home for the country's most important holiday, which this year falls on February 3, marks the largest annual migration of humans on Earth.

About 2.5 billion passenger trips are expected to be made during this year's Spring Festival, up 11.6 percent from last year, according to a report in the state-run China Daily newspaper.

Getting home is often difficult. Travelers, many of whom are migrant workers who only see their families once a year, sometimes waiting for hours, even days, in cramped stations, trying to buy tickets to ride home on overcrowded trains or buses. Airline ticket prices spike dramatically and roadways are perpetually clogged with drivers.



China's government has been working to improve infrastructure to make travel easier. Over this year's Spring Festival, hundreds of additional trains and buses are carrying passengers home and more planes are in the air. The Ministry of Railways has even, for the first time, opened a special page on its website to provide instant updates on train delays and ticket prices.

China is also embarking on a substantial transportation infrastructure overhaul, aimed at connecting its population of more than a billion people more quickly and carrying goods across the country more easily.

Partly as a result of billions of dollars in stimulus money poured into the economy to fend off the financial crisis that hit in 2008, Beijing has given the green light for both national and provincial-level projects involving the construction of massive new highways, railways and airports that could radically transform the way people move around.

The country's annual spend on transport infrastructure, including roads and railways, now exceeds 1.1 trillion yuan ($165 billion), the China Daily reported.

China's investment includes thousands of kilometers of high-speed rails. Already there are high-speed lines, with trains capable of speeds up to 350 kilometers per hour, running in the north between Beijing and Tianjin and in the south between Shanghai and Hangzhou and Wuhan and Guangzhou. The country will invest 700 billion yuan ($106 billion) in building railways this year alone, according to a report in the state-run People's Daily newspaper.

A route between Shanghai and Beijing will open in June. It is expected to cut travel time to less than five hours, compared with the current 10-hour journey. The country currently has 2,100 kilometers of high-speed track and by 2015, the country will have 16,000 kilometers, according to the railway ministry.

Supporters of China's high-speed systems, including the World Bank, say their construction has created new jobs and their completion will free up traditional railways to carry more freight, save resources and improve "the environment through the transfer of traffic from more costly and environmentally damaging modes of transport," John Scales, the World Bank's transport coordinator in China, said in a 2010 report on the country's high-speed rail development.
I do want to take the high-speed trains, but I don't have too much money. It would be really nice if the price went lower
--Zhang Gengsheng, plumber

Others are not so sure high-speed railways are the best solution to ease the overcapacity that plagues China's transport network.

"The high-speed rail makes no sense to Chinese people," said Zhao Jian, a professor at Jiaotong University in Beijing who researches rail economics. "Why? Because it is too expensive. The construction cost is too high. The operation cost is too high. I don't think Chinese people can afford the price. At present, the high-speed rail is a big loss."

Zhao said the money spent to build one kilometer of high-speed rail could build three kilometers of traditional rail. He also said in some areas in the country, traditional railways have been closed, forcing passengers to take the more expensive trains.

The result has been the coining of a new phrase now hot on the Chinese Internet: bei gaosu, which essentially means "to be forced to take the high-speed trains and accept their high ticket prices."

And many wonder what will happen to those on tighter budgets -- specifically migrant workers who make up the bulk of train passengers -- who may not be able to afford the higher price of high-speed trains.

"I don't think the Ministry of Railways did a careful and convincing investigation about who tries to get home," said Zhang Dunfu, a sociology professor at Shanghai University. "The decision-makers may be influenced by people who are rich or who are politically elite. Migrants, like the common people, they have absolutely nothing to say before the policy is carried out."

But a report on the website of China's railway ministry titled "The Benefit of High-Speed Rail for the People" highlights how villagers living along a high-speed rail between Wuhan and Guangzhou have benefited. More tourists are making trips to the region, raising the incomes of the villagers, who are mostly farmers, it says. The fast trains, the report says, are "changing people's traditional thinking of time and space."

But many passengers aren't thinking about "time and space." They're thinking about cost.
I don't care how much it costs. I would spend up to 200 yuan for going back home by high-speed train
--Chen Guang, migrant worker

Zhang Gengsheng earns 3,000 yuan per month (about $441) working as a plumber. He recently bought a train ticket back home to Suzhou, a city outside of Shanghai, FOR 60 yuan ($9). It's for a conventional train. The 30-year-old says he is willing to take high-speed trains if they become available on his route -- and if the price is right. It will take him more than 8 hours to travel 575 km home in a "hard seat" car, which is the lowest class on conventional Chinese passenger trains.

"I do want to take the high-speed trains," he said. "But I don't have too much money. It would be really nice if the price went lower."

On average, a second class ticket on a high-speed train from, say, Wuhan to Guangzhou, would cost nearly 500 yuan ($73). A first class ticket is 780 yuan ($114).

A comparable ticket on a conventional train between the same destinations is 143 yuan ($21) while a first class ticket is 238 yuan ($38). The traditional rail takes 13 hours while the high-speed train is only four.

Chen Guang is a 41-year-old migrant worker who works as a carpenter in Shanghai. He earns 2,300 (about $338) yuan per month. He recently spent 45-yuan ($7) train ticket back to his home in Huainan, a city in Anhui Province. It will take him nine hours to travel over 570 km home on a traditional train -- there are no high-speed trains running that route, but he says he'd pay a higher price if high-speed trains become available.

"Yeah, I definitely will take (high-speed trains)," he said. "You only go home once a year, I don't care how much it costs. I would spend up to 200 yuan for going back home by high-speed train."

All aboard for China's fast-track future? - CNN.com

 

[StingRoy]

Thanks @Kevrai for posting this article. I had seen a documentary on this very same topic on youtube, but wasn't able to find an appropriate article to post here.

 

[below_freezing]

There will always be complainers. When we didn't have high speed rail these people (Chinese too) were saying we were genetically inferior to Japanese and too dumb to make high speed rail. Now we have it, they complain about prices. They're the definition of low IQ self racists.

No one holds a gun to your head and makes you ride the high speed train. There's always the bus. I rode a 30 hour bus from Shanghai to Wuhan once because I had no money, these people will piss their pants before they sit on a bus for 30 hours.

There's so many legitimate things to complain about, high speed rail is not one of them.

 

[BigTree.CN]

I have been waiting for someone on this forum to bing this topic in since I read that Liu Zhijun was arrested. Now finally it comes.

Here is my two-cent on it. The HSR plan is not a personal idea of Liu, the implementation of it was approved by the highest policy maker of China, therefore it will not be stopped just because Liu was sacked.

 

[no_name]

High speed rail is there, So people are complaining? How is this worse than when HSR is not there? At least now you have more options, and in a few years, when income further increases, it will become very useful. To build things when they are really needed will be too late.

They see us winnin'
they hatin'

 

[CardSharp]

They see us winnin'
they hatin'

hahahahah...

My take on this is just that, the HSR is for the future, if China starts building these after the oil crunch comes, it will be much too late and we'll in much worse shape. And like below freezing said, people can just not take it, the regular transportation net is still there and better than what most countries have.

 

[StingRoy]

There will always be complainers. When we didn't have high speed rail these people (Chinese too) were saying we were genetically inferior to Japanese and too dumb to make high speed rail. Now we have it, they complain about prices. They're the definition of low IQ self racists.
No one holds a gun to your head and makes you ride the high speed train. There's always the bus. I rode a 30 hour bus from Shanghai to Wuhan once because I had no money, these people will piss their pants before they sit on a bus for 30 hours.

Can I ask you how much it costs in a Bus ticket from Shanghai to Wuhan? Of course people can take buses, but how can you move such a massive numbers of people through road? Isn't the point of railways ... to move people out of the roads?

 

[tanlixiang28776]

Can I ask you how much it costs in a Bus ticket from Shanghai to Wuhan? Of course people can take buses, but how can you move such a massive numbers of people through road? Isn't the point of railways ... to move people out of the roads?

There is still much more standard rail than HSR.