China is planning to invest a record $125bn in rail this year as the government looks to cushion the impact of slower economic growth. This would be 6% more than was spent last year, and 10% more than was originally planned, according to a report in the Nikkei Asian Review.
The Nikkei notes that the Chinese government expanded rail spending after the 2008 financial crash, but that investment declined after the 2011 bullet train collision and derailment in Zhejiang Province which left 40 people dead. Investment has been around $120bn since 2014.
The increase in spending comes as official figures, released today, show that the Chinese economy grew by 6.4% in the last quarter of 2018, the lowest rate since the global financial crisis of 2008. This has triggered demand stimulus measures from the government, including an acceleration in construction projects, as well as cutting taxes and boosting the money supply by tweaking banking rules.
It also comes after figures showed a rapid slowdown in investment in the country’s fixed assets. The South China Morning Post reported earlier this month that this had slowed to a decade low of 5.9% in the first 11 months of 2018.
China Railway’s annual plan envisages a 45% rise in new projects, resulting in the addition of 6,800km to the total network. High-speed rail will be expanded by 3,200km, which is more than is currently being operated in by (in order of size) Spain, Japan, Germany or France.
The use of rail to bolster domestic demand means that Beijing is now well ahead of its schedule to build 30,000km of high-speed railway lines by 2020.
Among the new lines under consideration is a conventional link through the mountainous terrain between Chongqing and Yunnan,
Projects to be undertaken after 2019 include a second railway from Sichuan to Tibet, a 1,700km line that poses huge engineering challenges, and may cost as much as $36bn.
Other planned projects include lines between Hunan and Jiangxi, Chongqing and Sichuan Province and the Xiong’an New Area and Henan.
The Nikkei notes that this expansion is not without economic dangers: China Railway’s total debt burden exceeds $735bn. In August last year, the Financial Times quoted Professor Zhao Jian of Beijing Jiaotong University, who said China Railway’s overall debts will grow to about $1.2tr by 2020.
Image: The Shanghai maglev train, which travels at a top speed of 430km/h (Alex Needham/Public domain)
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Whilst 1.2 trillion dollars in debt, for Chinese rail, sounds like a lot of money, that’s 1% of global government debt, for access of around a billion people to rail passenger transportation. 1 in 7 people globally, at a time of very low global interest rates, with a high probability of repayment, due to rail fares, this in a time of falling prices for renewable electricity, electricity powers most Chinese passenger rail traffic. Further high speed rail, frees up the freight rail lines, less time of trains blocking lines, better track, speeding up freight. Dedicated passenger lines, completely free up freight lines, China has a lower aviation, road fuel import bill, due to high speed and suburban rail, I’m aware that some lines don’t make sense economically.
But most do, as does the Belt Road, strategically for China, faster freight and later high speed rail passenger traffic, means goods to customers, at similar prices to sea shipping, faster. Witnesses what’s happening in Cambodia, expanding Han Chinese population in Sihanoukville, with sewage treatment, road, rent, food prices and garbage problems, because of the speed of the expansion of the city. We can take the example of the connection between London and Europe, now high speed, all the way to the city centre, there are now more passengers using that line, than flying to Europe, from London.