Tuesday, February 21, 2012

Falling High-Speed Rail Idols

We are arriving at a point in time when the Governor of California rejects the calculation that two plus two equals four. I'll explain. 

China has been the envy of the US government's high-speed rail advocates, starting at the top with our President.  China has been held up to the world as the sine qua non of high-speed raildom.  

Why, oh why can't we be as good as, or better than, China when it comes to high-speed rail, our Democratic leadership is asking. We are so envious that we want to, figuratively speaking, emulate Elvis by buying his white jump-suit, his hair-do, and his blue suede shoes. That still won't make us Elvis, of course.  It's more like a child's Christmas envy for coveting something someone else has.

That is to say, we better take a much harder look at China before we rush out to do business with them, and, more importantly, seek to emulate their expansive high-speed rail system.  In China's lust for prestige, they outdid themselves and now are reaping the consequences. 

One of the ironies of all this high-speed rail envy is the obsession with President Obama, his minions, and our own Governor Jerry Brown, for having such a train as the iconic expression of our determination to grasp and hold a future which we have nearly lost.  

We will win the future, we are repeatedly told. Is the US not the world's most innovative, creative, productive nation? Well, perhaps no longer.  If we set out to buy China's rolling stock and other hardware off their shelves, how, exactly, does that demonstrate our visionary leadership? It's a question that Jerry Brown has been avoiding.  As I say, for him, basic facts are pretty much irrelevant. 

As the thousands of kilometers of track became a graphic symbol of China surging to world domination in high-speed rail, we have failed to look more closely at the deep and blatant corruption of its empire builders, the flawed workmanship of manufacture and construction, and the amazing waste of vast amounts of money. And, as the trains were operating (and crashing) we failed to look at how expensive the tickets were and how few people were actually riding these trains.

Well, Governor Brown, take a good, hard look now at what you envy so much. 

Yet, it appears that your passion is not about the train at all. Which is what I suspect. It's about nothing more than getting your hands on the $3.3 billion from the FRA and squeezing an additional several billion out of the HSR state bonds.  

In which case, what they do or don't do in China is really none of your business, is it?  Unless, of course, you wish them to lend California additional billions in credit for their hardware and other forms of capital development.  And that, Governor, will be an even larger mistake. 

Wednesday 22 February 2012
China's high-speed rail project runs out of steam
China's high-speed rail project, the jewel of the country's transport policy and one of the most impressive feats of engineering in the world, has run out of money and will be scaled back dramatically this year.

By Malcolm Moore, Beijing
1:00PM GMT 21 Feb 2012
Out of 23 current railway projects, some 70 per cent have been suspended, partly suspended, or delayed, according to the Chinese state media.

Meanwhile, an unnamed source told Dow Jones, the news agency, that only nine new railways would be commissioned this year, compared to 70 last year.

Having run up enormous debts, the Chinese Railways ministry is struggling to persuade banks to continue to finance its ambitions.

Ticket sales, meanwhile, have been slow on some lines as travellers baulk at the price.

"The ministry cannot bear so much debt. It has already taken 240 billion yuan (£24 billion) of loans and if it takes much more how can it pay the interest?" said Wang Mengshu, a member of the Chinese Academy of Engineering and senior consultant on the high-speed rail project.

"It can make profits of about 70 billion yuan on freight, but it is making no money on passenger travel. The government should cancel some of the debt, or invest some money itself rather than asking the banks to finance it," he added.

"A lot of projects are half-finished and while nine new lines have been approved this year, no one has started building them."
By the end of this year, China's high-speed network is likely to stretch to over 6,000 miles, transporting hundreds of millions of passengers in spacious long-nosed bullet trains. The 819-mile journey from Beijing to Shanghai, more than twice the distance from London to Edinburgh, now takes under five hours.

At the height of the high-speed boom, trains were being fitted with toilets that cost 1.2 million yuan (£120,000) a piece, and taps imported from Japan that cost 7,000 yuan, according to an investigation by Century Weekly magazine.

However, China's high-speed rail ambitions, which include tendering for the London to Birmingham high-speed link, took a blow last July when two trains collided, killing 40 and injuring almost 200.

A few months before the crash, China's Railway minister, Liu Zhijun was removed from his post and now faces corruption charges. Zhang Shuguang, the deputy chief engineer, who is also under investigation, reportedly paid £540,000 for a house in Los Angeles while on a monthly salary of a few hundred pounds.

Questions were raised about how much of the £190 billion high-speed rail budget had been siphoned off, and whether it would have an impact on the safety of the network.

In the wake of the crash, the Ministry found it increasingly expensive to borrow money, and no longer had access to the huge stimulus loans that were handed out in the wake of the financial crisis to keep the Chinese economy going.

"The Ministry's debts are now worth 60 per cent of its assets, and some analysts think they may rise to 70 per cent this year," reported the China Business Times.

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