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Fast Track to Nowhere

by Samuel Staley

China’s experience with high-speed rail provides a cautionary tale

President Obama may have telegraphed an important theme for next year’s presidential election when he attempted to steamroll his new stimulus program through Congress by invoking the specter of falling behind China. “Building a world-class transportation system is part of what made us an economic superpower,” he claimed. “And now we’re going to sit back and watch China build newer airports and faster railroads?”

China’s experience with public infrastructure does hold important lessons for the U.S. But they aren’t necessarily the ones many Westerners, including the current U.S. president and his advisers, seem ready to embrace.

As high-speed-rail projects move forward in California, Pennsylvania, and Washington State, and regional high-speed-rail associations go ahead with plans in the Midwest, the Southwest, and the Atlantic Coast, it’s probably a good time to revisit the rail debacle now unfolding in China.

We’ve already had one glaring warning sign that the Chinese experiment has a few flaws. A high-speed rail collision near the city of Wenzhou killed 40 people and injured more than 200 last July, exposing systemic and institutional failures to the world. The accident forced the Chinese to put high-speed-rail development on hold for reassessment, while authorities reduce speeds on existing tracks and reevaluate signaling technology.

These events portend that a similar future might await the U.S. if we rush to adopt the Chinese “model” for infrastructure development. The problems that China’s high-speed-rail program encountered were not significantly different from those that faced large infrastructure programs rushed to completion in more mature economies.

The scale and rapidity with which China invested in its high-speed-rail network is breathtaking. Annual spending on high-speed-rail projects by China’s ministry of railways tripled between 2007 and 2010 as the government rushed to build the world’s most extensive network of high-speed trains. Borrowing by the railway ministry rose from 77.1 billion yuan to 1.7 trillion yuan to support this spending frenzy. High-speed track now makes up 8,358 kilometers of the nation’s 91,000 kilometers of rail lines. Moreover, China still plans eventually to build another 17,000 kilometers, boosting high-speed rail’s share to almost one-quarter of the nation’s rail system.

Under any circumstances, keeping track of spending on this scale would be a challenge, and the rail ministry has been criticized within China for its impenetrable accounting practices and lack of transparency in contracts. Because adequate accounting procedures weren’t in place, tracking revenues has been especially difficult, according to extensive investigative reporting by the Chinese business magazine Caixin. This is especially alarming given that the high-speed-train agency was supposed to run like a business (not unlike proposed projects in California and Texas). Unlike “social,” or subsidized, investments, it was supposed to make decisions based on profit and loss. But now the Chinese system faces a real risk of default, as revenues fail to cover operating and debt-service costs.

What lessons should U.S. policymakers draw?

First, technology still can’t overcome human foibles when schemes are rushed into implementation. While software failure was the proximate cause of the Wenzhou train disaster, the real problem was human error. Dispatchers had not been adequately trained to use the system, which had been hastily scaled up to higher speeds and greater complexity, so when a hardware malfunction created ever-spreading dangers, the dispatchers did not recognize the extent of the situation until it ended tragically. Complex, one-of-a-kind systems carry inherent risks in adapting, applying, and implementing new technologies. Cutting corners to achieve politically determined benchmarks increases these risks, with potentially catastrophic results.

Second, China’s enthusiasm for high-speed rail outpaced the ability of its engineers to adapt technology safely and efficiently. In 2004 China, acting in partnership with foreign firms, began to modify standard technology to fit the particulars of its system. As problems became apparent (none seeming particularly significant at the time), the government imposed even more ambitious objectives on its engineers. Instead of 120-mph trains, the original specification, they were now expected to achieve speeds of 150 mph, then 180 mph. Technology never really caught up, a factor compounded by the uniqueness and vastness of the Chinese system. The Wenzhou accident was one particularly tragic result of forcing a system to change too much, and too fast.

Third, large-scale programs, particularly those serving national goals and aspirations, risk growing too quickly and requiring vast sums of money, resulting in a lack of accountability and transparency while breeding corruption. The Beijing–Shanghai high-speed-rail route alone nearly doubled in cost as expenses went from an estimated 12.3 billion yuan to over 21 billion yuan. Many Chinese officials, including the minister of railways and the chairman of a major logistics company, have been removed from their positions because of corruption that may have led to billions of dollars of waste. Obtaining lucrative construction contracts during the mid-2000s appeared to be more about having connections than about doing high-quality and cost-efficient work, and middlemen were handsomely rewarded for “mediating” services. And there is reason to think the American experience will be similar: Cost overruns and concerns about fraudulent forecasts and financial accounting are already plaguing high-speed-rail projects in the U.S. (particularly California).

Fourth, Chinese travelers, it turns out, aren’t that different from Americans (or other Westerners), and when their incomes increase, they become less likely to ride trains.

In ongoing studies sponsored by the Reason Foundation that will be presented in Hong Kong this month and before the Transportation Research Board in January, researchers from the Highway College at Chang’an University are examining travel behavior among highway and train users. In earlier stages of development, Chinese travelers opted for buses, bicycles, and walking. But they increasingly prefer more flexible and adaptable travel modes, particularly the automobile. So high-speed train service is probably an upgrade for existing train riders, instead of a new alternative for travelers seeking faster ways to get from Point A to Point B. Indeed, even as China invests in its intercity rail program, it plans to add 45 civilian airports to the nation’s air-travel network by 2015. This shows that China’s transportation investment is aimed more at building the infrastructure for a wealthy economy than at trying to change travel behavior.

These lessons are important for infrastructure visionaries in the U.S., apart from the question of whether high-speed rail makes economic sense. After the Wenzhou accident, China is now stepping back and pausing, in an admirable effort to take stock of the implementation failures that have put the safety of its entire national high-speed-rail network in question. Let policymakers on this side of the Pacific take note.

– Mr. Staley is associate director of the DeVoe L. Moore Center at Florida State University and a senior research fellow at the Reason Foundation, where he manages the China Mobility Project.

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