China's Red Capitalism Desperately At Work: A Redundant $10 Billion High-Speed Rail Line Which Will Reduce Travel Time By 6 Seconds/Km

Reposted From Caixin Online

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(Beijing) – The eastern province of Shandong is moving ahead with plans to build a high-speed rail line funded mainly by local governments and private investors, but an expert questions whether the project is necessary.

The planned Jiqing line, which will link the cities of Jinan and Qingdao, will be 306 kilometers long and cost 54 billion yuan. It is the first high-speed rail line in the country to be mainly backed by funds from local governments.

The operator of the country's railroads, China Railway Corp., will fund 20 percent of the project, a source close to the Jinan Railway Bureau said on June 16, and the provincial government's investment vehicle, Shandong Hi-Speed Group, will handle the remainder.

The provincial government, lower-level authorities along the route and local government-backed enterprises will contribute cash and land. Forty percent of the total investment is expected to be open to private and foreign investors.

A source close to Shandong government said funding plans call for as much as 20 percent of the investment to come from foreign investors like Singapore's sovereign wealth fund, Temasek Holdings.

Shandong Railway Construction Investment Co., a subsidiary of Shandong Hi-Speed, has held talks with more than 10 domestic and overseas companies interested in the project, a source from Shandong Railway said.

Total investment is likely to rise to 70 billion yuan, the source said.

Half of the cities involved in the project have not made their financing plans yet, but the provincial government is pushing the project forward and planning to start work as soon as possible, the source said.

Zhao Jian, director of the Urbanization Research Center at the University of Communications in Beijing, questioned whether the new line was needed.

One passenger line and one cargo line already serve the route and both are well short of running at full capacity, he said. Fifty-five passenger trains run each direction every day, but the figure could be as high as 160. The new high-speed trains would cut the travel time by only 30 minutes, Zhao said.

Zhao said the project served officials' vanity in the guise of financing innovation. CRC is already under great financial pressure, as its total liabilities had reached 3 trillion yuan and most of the existing high-speed lines are operating at a loss, he said.

Work on the Jiqing line was to start in early 2011, but it was delayed after a deadly train crash in the eastern city of Wenzhou in July that year and an ensuing anti-graft investigation into the industry that brought down former rail minister Liu Zhijun.

The country's investment in high-speed railroads has since slowed, and progress on the Jiqing project stalled.

Although investment for rail lines has picked up this year, the Jiqing project had a hard time getting government funding because it linked two cities in the same province, as opposed to a more desirable line crossing provincial borders, the source from Jinan Railway Bureau said.

Despite this, the project won the backing of the National Development and Reform Commission, the country's top economic planner, because of its diversified financing plan. The central government has said it wants to see more private involvement help build railroads.

Published at Caixin Online

 

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