Can China’s high-speed rail avoid Japan’s mistakes

Recently, Beijing-Shanghai high-speed railway has gain profits for the first time after operation for 3 years. Why can this railway gain profits when most high-speed railways in the world are suffering loss in operation? If go back to the history, we’ll discover that it’s not weird for one high-speed railway to make profits from worldwide, but it’s rare to see many high-speed railways making profits among the whole country.

“High-speed railway for votes” causes loss in Japan

There has been profit record before Beijing-Shanghai High-Speed Railway, that is: Tokaido Shinkansen between Tokyo and Osaka, which is also the first high-speed railway in the world to be put into commercial operation. In the third year, the railway started to make profits. But it is interesting that the profits-making capability of high-speed railways is increasingly declining, or they even fall into deficit with rising number of high-speed railways.

Why does Shinkansen suffer losses after profits? It is because the decision-making mechanism is changed from economic factors to political factors. In preliminary stage, high-speed railways link populated areas of developed industries, therefore they have a high utilization ratio and good economic returns. Taking Tokaido as an example, it links Keihin, Nagoya and Hanshin, these three intensive industry belts. However, upon completion of the Shinkansen from Tokyo to Osaka, Japanese politicians require constructing Shinkansen at their own cities or counties. So economic logic is replaced by political logic, and then problem arises.

All railways constructed after Osaka to Hakata are in the red because the politicians demand to construct high-speed railways at their own hometowns on account of votes – this is the famous “high-speed railways for votes” in Japan’s high-speed railway construction history.

In 1960 when Japan’s Shinkansen started construction, cars only accounted for 5% in Japanese traveling, while railways for 77%. However, in 2007, the proportion declined to 29%, which is caused by debt inflation of Japan’s railways. By 1987, the debt of Japan’s state-owned railways had exceeded 350 billion dollars, and finally Japan’s railways were ended by turning into privatized.

Can High-Speed Railways Make Profits in Remote and Border Areas

How to avoid Japan’s mistakes for China’s high-speed railways? This is a problem to be noted in subsequent high-speed railway construction.

By the end of December 2014, China’s high-speed railway operation mileage has been close to 20,000 km. However, the profitable Beijing-Shanghai high-speed railway is only 1,318 km long. Nowadays, the high-speed railways are centralized in populated areas of developed economy and core cities. With network-shaped construction and operation, high-speed railways will continually be constructed at sparsely-populated remote and border areas. It is a problem to be noted as to how to make profits for the high-speed railways in these areas.

In fact, this problem is not only reflected in high-speed railways, but also in expressways. Although the expressways in major cities are profitable, their losses are worrying when seeing from the whole country. From 2011 to 2013, the losses of nationwide expressways are respectively 32.3 billion yuan, 56.6 billion yuan and 66.1 billion yuan.

Certainly, the logic for China’s high-speed railway construction in economic less-developed areas is entirely different from Japan’s “high-speed railways for votes”. It is because the central government wants to stimulate the development of economic less-developed areas through high-speed railway construction. There was someone from the National Development and Reform Commission pointing out: “we can not only attach importance to finance, but also to drive of local economy. This is also an important reason for investment.” However, is it too expensive to promote the economy of these less-developed areas?

Anyhow, the parties concerned should endeavor to expand Beijing-Shanghai Railway’s profitable record to other railways, and the most reliable method is to conduct stringent cost-benefit analysis on newly built high-speed railways. We want to build high-speed railways, and we also have to avoid the phenomenon of increasingly fast railway speed and heavier fiscal burden. In fact, the phenomenon has arisen in Japan and other countries, as well as in China’s expressways. So how to avoid their mistakes for China’s high-speed railways? This might be a problem worth pondering after profit-making Beijing-Shanghai high-speed railway.

Published in Beijing News | 2015-1-29