Saturday, April 23, 2011

Want to make the biggest mistake ever? Learn how from China's high-speed rail program.

Attention, America.  Envious of China's many miles of high-speed rail?  Want to emulate their high-speed rail system in the US?  After all, why should the Chinese get way ahead of us with technologies such as high-speed rail when we are the first, the smartest, the best, the richest, and the most materialistic nation in the world?  No need to answer.

Well, we've been watching China lately and they seem to be having a run of bad luck with their thousands of miles of high-speed train track.  Yes, they have more miles than any other nation, and we, of course, are shameful laggards with only four hundred miles of the Acela route to show how far behind we are. 

It turns out that Chinese senior executive committee of head communist honchos wasn't thinking that clearly when they proposed to have such an extensive high-speed rail program, hoping the prestige would make all the other industrial countries envious, which it certainly did in the US.  

Now we learn that they "got a heap of trouble."

Here's an article from the Washington Post, as Liberal as you can get, with a high-speed rail loving editorial board.  They are running this op-ed article by Keith Richburg, writing from Beijing.  It's about the Chinese high-speed rail system, and it's not a pretty picture.

OK, fellow Democrats. After reading this article, if you still continue to support the US intentions of creating a national high-speed rail program, I urge you to get that high-school diploma you failed to obtain, and be sure to take some critical thinking courses while you're back in school.  Making the obvious connection between what they have been doing in China and what we seek to do here isn't rocket surgery.  Here are some things to look for when making that comparison:

1. Corruption.  It's already started in California and has been documented by the Inspector General and the State Auditor.
2. Over-building.  Call it over-reaching.  We can't start small.  No, we have to do a big one with no experience whatsoever.
3. Lack of quality controls in construction. Well, our lead contracting consultants are Parsons Brinckerhoff, famous for the Boston Big Dig.  Need to know more?
4. Building for prestige.". . .as the leadership pursues grandiose projects, which some critics say are for vanity or to engender national pride. . ."   Obama wants to have 80% of Americans living right next door to a high-speed train station by 2030. He calls it "winning the future."  Is that a legacy or vanity program, in time for the 2012 election campaign?
5. Under-projecting costs and over-projecting ridership and revenues.  Just read this article about reducing speed and ticket costs.  We've already posted many blog entries about China's HS trains running nearly empty.
6. And last but not least, incurring huge debts that will have consequential adverse impact on the entire economy. We've been warning about that even before the 2008 elections. As I say in just about every other blog entry, read William Grindley's papers.  I'll re-post the appropriate URLs in future blogs.

Perhaps the most interesting point Richburg makes in the article is the comparison of China's potential rail crisis with our sub-prime mortgage explosion which burst the housing bubble and launched the recent -- and not yet over -- Recession.  Now are you frightened?  You should be!

How much warning is enough to change behavior? Let's watch and see if even our Democrats can learn anything. 

Are China’s high-speed trains heading off the rails?

By Keith B. Richburg, Saturday, April 23, 8:53 PM

BEIJING — China’s expanding network of ultramodern high-speed trains has come under growing scrutiny here over costs and because of concerns that builders ignored safety standards in the quest to build faster trains in record time.

The trains, a symbol of the country’s rapid development, have drawn praise from President Obama. But what began in February with the firing and detention of the country’s top railway official has spiraled into a corruption investigation that has raised questions about the project’s future.

Last week, the new leadership at the Railways Ministry announced that to enhance safety, the top speed of all trains was being decreased from about 218 mph to 186. Without elaborating, the ministry called the safety situation “severe” and said it was launching safety checks along the entire network of tracks.

The ministry also announced it would reduce ticket prices to boost lagging ridership and would slow construction of high-speed lines to avoid outpacing public demand.

With the latest revelations, the shining new emblem of China’s modernization looks more like an example of many of the country’s interlinking problems: top-level corruption, concerns about construction quality and a lack of public input into the planning of large-scale projects.

Questions have also arisen about whether costs and public needs are too often overlooked as the leadership pursues grandiose projects, which some critics say are for vanity or to engender national pride but which are also seen as an effort to pump up growth through massive public works spending.

The Finance Ministry said last week that the Railways Ministry continued to lose money in the first quarter of this year. The ministry’s debt stands at $276 billion, almost all borrowed from Chinese banks.

“They’ve taken on a massive amount of debt to build it,” said Patrick Chovanec, who teaches at Tsinghua University. He said China accelerated construction of the high-speed rail network — including 295 sleek glass-and-marble train stations — as part of the country’s stimulus spending in response to the 2008 global financial crisis.

Zhao Jian, a professor at Beijing Jiaotong University and a longtime critic of high-speed rail, said he worries that the cost of the project might have created a hidden debt bomb that threatens China’s banking system.

“In China, we will have a debt crisis — a high-speed rail debt crisis,” he said. “I think it is more serious than your subprime mortgage crisis. You can always leave a house or use it. The rail system is there. It’s a burden. You must operate the rail system, and when you operate it, the cost is very high.”

Part of the cost problem has been that each segment of the system has been far more expensive to build than initially estimated, which many trace directly to the alleged corruption being uncovered, including a flawed bidding process.

After the railway official, Liu Zhijun, was detained by the Communist Party’s disciplinary committee, stories began trickling out about how a businesswoman in Shanxi province set up an investment company that took kickbacks from firms awarded contracts on the project.