China’s Growing High-Speed-Rail Troubles

by Lou Dolinar

The Chinese high-speed-rail scandal appears to be metastasizing. The latest casualty, reported this week by AP, is Zhang Shuguang, an engineer in charge of research and development, under investigation for “severe violation of discipline.”

In February, the head of China’s Ministry of Railways, Liu Zhijun, was removed on corruption charges. No official details, but kickbacks, bribes, illegal contracts, and sexual liaisons are part of the picture. Unless the mess is a big one, some analysts say, the Chinese government would tend to protect such a high-level bureaucrat.

The Chinese rail system has been touted by American rail enthusiasts, including President Obama, as the great wave of the future. In fact, it seems to be fulfilling most of the dire prophecies of HSR opponents in the U.S. Ridership on many of the lines is below projections. Cash-flow problems have pushed the price of financing significantly higher, and may well be unsustainable. Substandard workmanship is widespread, with concrete bases for system tracks deteriorating to the point where trains may have to run below rated speed in the near future. Cost overruns are anyone’s guess, thanks to China’s opaque securities reporting. Foreign firms that have worked on the projects say China is stealing their intellectual property.

And the system is deeply unpopular with working- and middle-class Chinese, who can’t afford the pricey tickets. Part of the rationale for the HSR system was to shift passenger traffic to make room for more freight trains on existing standard-speed lines. But tickets on those lines were a fraction of the price of comparable HSR seats, and those trains are disappearing, leaving million of Chinese without economical transportation options.

It will interesting to see whether the scandal spills over to any of the Chinese companies that are currently angling for contracts to build similar projects in the United States and elsewhere.

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