This is from Wei Gu, who writes for Reuters.
We read a lot of articles that arguing that high-speed rail infrastructure development is a bad idea in a bad economy such as we are currently experiencing. The inference is that when our economy returns to vibrant health, it will then be a great time to pour mega-dollars into mega-infrastructure projects such as HSR.
Well, the Chinese, flush with economic growth, have determined a crash program to build a jaw-dropping network of high-speed rail and do it fast. They are now reaping the rewards of their hubris. Too much, too fast, too soon.
We all have noticed how difficult it is to give politicians advice. They all labor under the conviction that they were elected for their infallible wisdom and flawless decision-making. Our politicians aren't a lot different than the Chinese ones who weren't elected.
The US is engaged in a Democratic Party led agenda to borrow and invest; in our case, in a high-speed rail program. In this instance, it's to reverse unemployment and to improve the economy. My reading suggests that it won't do either.
What it will do is cost the US, and California, far more than our economy can tolerate, particularly now. The Chinese HSR program is only superficially intended to increase mass mobility. It's real intention is prestige as they seek to shape their nation into a world industrial leader. Therefore, they over-built and now have empty trains, highly questionable construction, and skyrocketing debt. A deadly combination.
What is not driving either the Chinese or the US HSR ambition is a careful analysis of transit needs, or a very cautious approach to the deployment of technologies that are far more fragile and demanding than those from the era of "iron horses." The intrusion of politics is like sand in the machinery.
Ordinarily, one would say, "live and learn." In this case, people, more than the Chinese are willing to admit to, died. In the US we run the risk of failure at numerous levels, including our deplorable economic situation and our failure to prevent the wasting of a fortune and still not fix anything.
Among our victims of this disaster will be the political careers of those elected Democrats who persist in refusing to acknowledge the great harm that their advocacy can incur.
Wei Gu / July 26, 2011, 0:42 IST
China rail: China's high-speed train tragedy underlines the significant risks of the runaway economy. If it fails to slow down properly, a crash is unavoidable. Things have been built quickly with little attention paid to safety and quality. This is financially unsustainable. A badly handled accident may even trigger political problems.
The collision of two high-speed trains confirmed the public’s worry about China's fast locomotives. The country now boasts of the world's longest high-speed rail network, after it redesigned imported trains to enable them to run at a much faster speed. The industry has been built in the old-fashioned Chinese way, with lots of debt, under tight government control, and in a fast and furious fashion. Rapid growth can easily lead to problems. Investment growth accounted for a record 92 per cent of China's GDP growth in 2009. Much of it went to white elephant projects like the high-speed rail system. Easy money has sown the seeds for inflation and bad debt. Consumer prices rose 6.4 percent in June. The possible collapse of the property market and explosion of local government debt now threaten to derail the world's second-largest economy.
China's debt-financed investment boom is running out of steam. The Railway Ministry failed to fully sell its $3 billion bill offering in July, as investors became more nervous about its bloated balance sheet. The ministry's total debt soared by 45 per cent in 2010 to $300 billion, accounting for 57 per cent of its assets. China's overall banking system has also become dangerously big. Assets at Chinese banks now total $14.6 trillion, equalling all the other 42 emerging markets combined, according to Fitch.
Corruption is another problem of the tightly managed system. Three top rail officials are now under investigation, including the former minister who led the investment drive. After the train crash, authorities quickly responded by sacking three railway officials in Shanghai, but anger has risen over reports of the ministry burying parts of the wrecked trains near the site. The train tragedy shows that political and social risks run high when China fails to bring the economy to a soft landing.
For further commentary see www.breakingviews.com