Monday, February 20, 2012

China's highly troubling high-speed rail: A required study lesson

If I was Jerry Brown's mom, I would sit him down at the kitchen table and make him read this article, below. Then I would make him write a 250 word essay explaining why he insists on perpetuating a mindless project doomed to fail to meet each and every one of its ostensible goals. 

Clearly one of the problems, but by no means the only one, is that Brown and his minions don't do their homework. They don't do their required reading assignments. They either don't know, or they do know but don't care. It's reprehensible either way.

Of course, there are other motivations for insisting on a project that the voters of California, if they had a choice today, would reject. And that's the money.  We've said this many times.

The state is in an economic funk. It is at the top of Governor's priorities to fix. But, he has other priorities as well. For Jerry Brown, the low-hanging fruit is the free $3.3 billion from Washington for which he has to do nothing but keep the HSR alive and functional.  He can enter these dollars, plus all the additional funding he can extract from the Proposition 1A bond issue, into the budget deficit and debt equation. He can and will claim a major success.  

The second priority is that an aging Governor needs a memorial tomb stone, the way the Pharaohs built their Pyramids, to remind the world into posterity of their greatness.  In effect, Governor Brown seeks to initiate the Governor Jerry Brown Memorial High-Speed Rail

As a sub-clause to this ambition is the Governor's need to be perceived as great as his infrastructure building father, Governor Edmund Brown. But, we'll keep Freud out of this discussion for now.

We can see the Governor's ambitions come to light when he cites his litany of comparable mega-infrastructure examples. One of those is the Eisenhower Interstate Highways System.  The Governor refuses to accept the fact -- and it is a critical fact -- that the Interstate is just that; interstate. (Also, there was a complete funding plan in effect from day one.)

Which is to say that this highway network was intended to serve ALL Americans, unlike the California high-speed rail project, which will serve only a handful of well to do Californians.  National tax dollars need to go to National problems, not a mega-billion dollar fancy luxury train between San Francisco and Los Angeles.  

Yet, one more, lower order priority for the Governor is the Democratic faith in public mass transit. The problem here is that high-speed rail is neither public nor mass.  It is exclusive -- only for the affluent -- and therefore not the utilitarian and practical commuter rail services so badly in need of upgrades in both of California's major population regions. 

The fact is that the state does not have an inter-city transit problem. Those frequently identified problems, such as pollution and congestion, can all be found within the metropolitan regions of the Bay Area and the greater Los Angeles Basin and that's where they need to be solved.  

You might argue that building a high-speed rail system to solve local problems is like using a sledge hammer to kill flies.

China’s high-speed rail constructions grind to a halt
February 20, 2012
Also Sprach Analyst

Also Sprach Analyst is a website on global finance and economics with a special focus on China and Hong Kong economy, finance, and real estate.

Last year, we have been talking about how pointless high-speed rail was, and indeed that it makes very little, if any, profit, and the Ministry of Railways have been massively indebted in order to build the infrastructure, which crashed.  

By the end of third quarter, the Ministry’s total debt has risen to RMB 2.228 trillion, and net profit for the 3 quarters amounted to RMB137 million only.  With little profit and high debt, the Ministry was already having trouble to keep construction continued last year, especially after the accident.

Expect that to continue into 2012.  China Business Times reports that the high-speed rail has been, on the whole, under-utilised.  While the regular trains were all full during the “Chunyun” peak season around the Chinese New Year, high-speed trains in the Beijing-Shanghai line has been consistently under-used because high-speed trains are too expensive for most people.  Even at “expensive” rates, high-speed trains aren’t making enough profit to pay down debts.  

As debt reached 2 trillion level, the Ministry is having trouble to get new fundings as monetary policy was tightened for the best part of last year.  Not to mention all these safety concerns after the accident (like having a chef to build bridges) which slowed or stopped constructions.

This is, of course, very predictable, because we have already known from experiences of other countries, according to Bent Flyvbjerg:

". . . .average cost overrun for railroad projects amounts to 44.7%, and 84% of the times the rail passenger forecasts were wrong by more than 20%, and 90% of the times the rail passenger forecasts over-estimated traffic."

The only thing unique is that this is happening on a massive scale.

This article originally appeared here: China’s high-speed rail constructions grind to a halt

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