Remember that “marvelous” statement by New York Times columnist, Thomas Friedman, not that long ago? Well, he just might get his wish.
Last month there was a horrific crash involving two trains in China’s high-speed rail system. This event has focused attention on China’s system, something Mr. Freidman apparently wishes was in this country. So, it is worth some time understanding China’s high-speed rail.
We are told that the cause of the crash was the signaling system. Many say our signaling system is so much more advanced than China’s, that a similar high-speed rail crash could not happen here. But, what happened in China will happen here, and it has nothing to do with signaling systems.
Construction of the fast-train network was a linchpin of China’s economic stimulus plan to counter the global financial crisis. Led by lending from commercial banks, [China’s] Railways Ministry’s debt burden increased to hundreds of billions of dollars…[emphasis supplied]
Didn’t we have high-speed rail as part of our stimulus?
For the central government, the [Railways] ministry’s woes add to concerns around debt from the stimulus plan…analysts warn that the burden could suck funds away from other fiscal priorities and could saddle China’s state-run banks with bad loans. [emphasis supplied]
Zhao Jian, professor of economics at Beijing Jiaotong University offers this assessment.
Building high-speed rail cannot generate enough cash flow. Cash flow comes from the number of passengers…They should have built ordinary trains, but instead they built high-speed ones, which doesn’t correspond to market demand. [emphasis supplied]
And, were that not enough, Stephen Green, Standard Chartered economist offers this:
There is no evidence that operating revenues can grow significantly faster than operating costs. Indeed the evidence at present suggests the opposite may be true.
Will we learn from history, or are we condemned to repeat it?