We Dodged This Bullet Train

The United States truly dodged a bullet when it elected not to build any high-speed rail other than the ill-fated California route. As described in recent Youtube videos, high-speed trains are doing more harm than good to China’s economy. The two videos below present similar information but each has some unique data that justify watching both.

China’s nearly 24,000 miles of high-speed rail lines are more than twice as much as the rest of the world combined. Two of the lines — Beijing-Shanghai and Beijing-Guangzhou — are at least covering their operating costs, but the rest are real money sinks, with at least one line not even earning enough in ticket revenues to pay for the electricity required to power the trains.

As Beijing Jiaotong University Professor Zhao Jian, who is quoted in both videos, observed in a 2019 opinion piece, China’s high-speed routes are capable of moving 160 trains a day in each direction, but only Beijing-Shanghai and Beijing-Guangzhou come close to that level of service. One route carries only four trains a day each way. The huge amounts of money spent to construct underutilized lines is never recovered.

The problem is that rural provinces are eagerly going into debt to build high-speed rail in the hope that it will boost their economies. China State Railways has financed the construction of lines in eastern provinces, where most of the people and economic activity are, but relies on the central and western provinces to pay for most high-speed rail lines being built there. These provinces have debts of well over $3 trillion, partly due to high-speed rail construction and partly due to construction of high-speed-rail-oriented developments: high-density residential areas around rail stations, many of which are not yet occupied and number among China’s “ghost cities.”

When high-speed rail lines were found in only a few parts of China, those areas may have benefitted economically. But once high-speed rail blanketed most of the eastern and central provinces, the benefits of new lines were low. Nationally, it was a zero-sum game anyway, with any local benefits being offset by slower growth elsewhere.
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China’s high-speed rail network is mostly in the eastern half of the country. The line deep into the northwest doesn’t earn enough revenues to pay its electricity costs.

China State Railways itself has a debt of around $900 billion, and its net operating revenues may not be sufficient to meet interest payments on this debt. As a result, an increasing share of the roughly $50 billion in bonds it sells each year is being used to repay older bonds, not build or operate rail lines.

The emphasis on high-speed rail effectively crowded out rail freight. Before 2005, China was rapidly growing its conventional rail network, which was used to ship coal, grain, and other goods as well as move passengers at less than high speeds. Moving goods by rail cost less than by truck and rails carried half of the freight moved in China.

Construction of conventional rail lines slowed after China began building high-speed rail lines in earnest in 2005. To help pay for high-speed rail, China State Railways raised freight rates 11 times since 2005. Today, shipping by rail costs twice as much, per ton-mile, as shipping by truck, where in the United States shipping by rail costs less than one-fourth as much as shipping by truck. By 2016, rail’s share of China’s freight had declined to 17 percent, and it is probably even less today.

China’s solution is to spread the pain by selling its high-speed rail technology to other countries, putting them heavily in debt. It is planning or building high-speed rail lines in Laos and other countries that can’t really afford them. This is part of China’s “belt-and-road initiative,” which has also been described as “debt-trap diplomacy.” Yet, as some have pointed out, loaning money to other countries so they can build high-speed rail that they can’t afford also adds to China’s risk.

As the second video above notes, China’s high-speed rail is a gray rhino, meaning a risk that is obvious but ignored by political leaders. All of this sounds all too familiar to anyone familiar with transportation politics in the United States, the United Kingdom, or other countries. Once countries begin to subsidize some form of transportation, the subsidies spin out of control.