The real measure
of success is that demand is rapidly climbing and will see the industry work
out any issues. It also informs us that
it needs to be deployed globally were fully justified. China just happened to be the best possible
case in which it was possible to build into a rapidly growing economy.
North America
has lagged simply because the case is compelling only in a couple of shortish
routes. Worse our population base in the
Great lakes region is stagnant where a Chicago, Detroit, Toronto, Montreal, New
York, Washington route looks really good.
At high speed, we are only adding an hour or so to an optimal geographic
route to serve most of one hundred million.
India makes the
best case, but they are still in the early stages of establishing a creditable
building industry and getting serious.
Europe is pretty well built out.
g
By Yichuan Wang August 22, 2013
Yichuan Wang is an undergraduate economics and
mathematics student at the University of Michigan.
Has China overinvested in high speed rail? Anecdotal
stories of empty train stations (paywall) in far-off provinces have led some
to conclude that high-speed rail is just another Chinese white elephant—an
investment without a cause. But the recent experience with high-speed rail
belies this narrative, and a closer look at the data reveals that
high-speed rail has been, and is set to be, a vital part of China’s growth
strategy.
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Passenger rail has grown very quickly over the past
decade. As seen above, from 2001 to 2011, national passenger turnover doubled.
Yet this rise in demand has not been accompanied by a comparable increase in
the length of railroad track. As a result, each kilometer of rail is now
supporting more passengers. In other words, rail utilization has become more
intense. In 2001, the average kilometer of rail supported 680 km (422 miles)
of passenger travel. By 2011, this rose to 1,030 km, a 50% increase. This
phenomenon has been going on across the country—particularlyin the inland
provinces. During the same time period, rail intensity in the frontier province
of Qinhai increased by a factor of 2.5. In no other period of Chinese history
has passenger rail demand been this strong.
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In this context, high-speed rail has become
important by enabling a more intense utilization of existing railways. When too
many trains take too much time traveling the same length of track, they can get
in one another’s way. But high-speed rail gets around this issue by reducing
the amount of time any single trip takes. For example, the July 1, 2012 opening
of the Yichang-Wuhan high-speed rail line cut travel time between the two
cities from around four hours to only two. The recent Guangdong-Beijing line has also cut
travel between the two cities from 20 hours to just eight.
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This has occurred across the country, and as a
result, high-speed rail has allowed more trains to be placed on the same length
of tracks without overcrowding.
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High-speed rail isn’t short of passengers either.
Back in 2011, Tsinghua University professor Patrick Chovanec penned an editorial arguing that high-speed rail would be too expensive
for most Chinese citizens to use, and therefore, would not have enough riders
to sustain itself. But just one year later, average daily ridership on the
high-speed rail network has hit 1.33 million daily passengers—more than one-fourth of the total number of
passengers on the rail system.
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The customer reaction to the previously discussed
Yichang-Wuhan rail line has been especially positive. The July 1 opening was first announced on a
government website on June 25 at 10 p.m. That night, the train station received
calls asking about tickets from more than 50,000 people. The news about the
opening also led a blogger in Yichang to exclaim: “Two hours from Yichang to Wuhan!
A trip that I never dared to imagine has now become reality—truly a blessing
for the masses.” Subsequently, during this year’s three-day summer boat
festival, the Yichang train station saw a staggering 72,000 passengers pass
through, up 71% from a year earlier.
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Given that inland Hubei, a relatively poor farming
province, has benefited from such an enthused ridership base, this bodes well
for expansion in other parts of the country.
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The above data and anecdotes show that high-speed
rail is a justified investment, if only based on current conditions. But it
still ignores a much bigger issue: the importance of high-speed rail to China’s
future development strategy.
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First, for China to continue growing, it must work
on raising the income levels of the inland provinces.
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So as more Chinese manufacturing moves inland,
efficient freight transport will become even more necessary. Otherwise, the
factories will be cut off from the coastal markets, and therefore will miss the
opportunity to become as competitive as Guangdong and other coastal provinces
were 10 years prior. As discussed above, high-speed rail reduces the time
passenger trains spend on the railways, and therefore open up more room for
freight trains. This is good timing, as freight demand is likely to only
increase as more goods need to be shipped from inland China to be sold and more
coal needs to be shipped across the country to satisfy rising energy demand.
Thus, by strengthening the freight transport system, high-speed rail raises
growth in rich and poor provinces alike.
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Second, by making travel between large cities more
economical, high-speed rail builds a foundation for service industries. Since high-speed
rail dramatically cuts down travel times, many trips that used to be overnight
now can be done in a day. While this may not be as important for the average
tourist, this can be indispensable for client meetings in the business world.
Without this, many high value added service industries, such as consulting or
finance, would not be as strong.
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Third, by making travel and tourism cheaper for
middle class Chinese families, high-speed rail can actually help China
rebalance towards consumption. According to estimates from the World Travel and Tourism Council, the tourism industry makes up 10% of
employment in China, and its direct and indirect effects add up to around 14%
of China’s GDP (pdf). Since tourism depends on cheap travel, high-speed rail
could play a pivotal role in fostering this industry.
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And indeed it has. During this year’s spring
festival, the opening of the Beijing-Guangdong line caused an explosion in long
distance travel packages for Beijing, with a major tourism company reporting
a 50% year-over-year growth in this category. It is further forecast that
the opening of this new line will result in an over 20% increase in Beijing
tourism by
the year’s end.
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By making travel much cheaper, high-speed rail can
encourage more tourism and consumption growth.
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Fourth, if China is to avoid an environmental
catastrophe, it needs to start developing energy-efficient forms of transport
right now, and high-speed rail certainly fits the bill. As a recent Economist has documented, China is experiencing never-before-seen levels of
air pollution. And given that China has a population of 1.34 billion people, it
cannot afford to have intercity transportation be based on automobiles. There
is not enough space—both physically and environmentally—for China to expand on
that path. High-speed rail also competes with Chinese airlines. As CNN has documented, high-speed rail has become a very attractive
option against a backdrop of worsening airport congestion. Because air travel
is one of the most carbon intensive forms of
transport, any
substitution away from air to rail reduces the Chinese carbon footprint.
Therefore, besides being a prudent investment in economic growth, high-speed
rail is also a necessary investment in preserving China’s environment.
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This is not to say there is nothing to criticize
about China’s high-speed rail development. The procurement procedures for
Chinese rail cars are notoriously corrupt. Caixin has found stories of “sink tops that cost 26,000 yuan each,
[and] 11,280 yuan for a water valve.” But the Chinese government is slowly
improving on this matter of financing. While not directly related to high speed
rail, the recent invitation for foreign bids to improve Chinese
infrastructure represents
a step in the direction of more efficient infrastructure construction. By
declaring an intention to put private firms on the same level as state-owned
firms in the bidding process, this is a sign that the Chinese government is
slowly improving on its state driven model. Unlike the past decade of “the
state advancing, the private sector retreats” (guo
jin min tui), future Chinese
rail development can advance alongside the private sector, thereby reducing
risks of corruption.
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But even if difficulties should arise, they should
be put in the proper context. Any complex system will occasionally fail. As
a Chinese blogger writes, the proper response in this situation is to
“discover problems, face the problems, and then solve the problems.” This is
normal and one does not need to condemn the entire system at the first sign of
trouble, nor let the first sign of pessimism derail an entire growth story.
Even if there are risks, the rewards are far greater. To channel the words of
the late US president John F. Kennedy, China must invest in high-speed rail not
because it is easy, but because it is hard—and because it represents a critical
next step in China’s march toward development.
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Follow Yichuan on Twitter at @yichuanw. His blog is Synthenomics. We welcome your comments at ideas@qz.com.
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