The high-speed Hainan train, built at a cost of about $3 billion and traversing just 190 miles along the island’s coast, is in many ways a metaphor for China’s infrastructure building boom of recent years — efficient, super-modern, costly and so far vastly underused.
Since late 2008, when China enacted a fiscal stimulus program to avert the contagion effects of a global economic slowdown, the country has embarked on a building binge, including new highways, high-speed rail lines, bridges, municipal subway systems, terminal buildings and nearly a hundred new airports.
A new rail line cut travel time between Beijing and Shanghai to just five hours. The world’s longest bridge over water opened this year in the city of Qingdao, spanning 26 miles across the Jiaozhou Bay. China is on track to soon surpass the United States in the number of highway miles built.
To many who have looked on with envy, this amounts to investing in the future.
“Building a world-class transportation system is part of what made us an economic superpower,” President Obama said in his September speech to a joint session of Congress. “And now we’re going to sit back and watch China build newer airports and faster railroads?”
But this building boom has raised questions here. How much infrastructure building is too much? Has the country taken on too much debt to build the world’s fastest trains, longest bridges and most expansive highway network?
And, in light of two major accidents — a deadly collision of two high-speed trains in Wenzhou in July and a September crash on a subway line in Shanghai — is the race to build coming at a cost to safety?
“High-speed rail became a holy grail for progress,” the investigative newsmagazine Caixin wrote in a September editorial. Recalling the language used during Mao Zedong’s disastrous Great Leap Forward, the editorial said the grandiose expressions used to rally support for the bullet trains “were designed to elevate China’s high-speed rail system as the epitome of the nation’s rise to greatness in the globalized world.”
An even harsher commentary came after the Wenzhou train crash, which killed 30 people, from of all places the newspaper People’s Daily, the mouthpiece of the ruling Communist Party. The paper warned that China did not need “blood-soaked GDP.”
The government’s centralized planning system has faced much tougher scrutiny, particularly from the media. Most of the big-ticket infrastructure projects were designed and implemented from the top down, with virtually no public input. The result has been a series of “white elephants” — such as a “ghost city” of empty office buildings in Ordos in Inner Mongolia, or huge airport terminals in isolated western cities with few passengers.
One longtime critic of the government’s infrastructure spending is Zhao Jian, an economics professor at Beijing Jiaotong University, the country’s leading transportation school. He has argued that while this developing nation needs infrastructure, it does not need the most modern and expensive infrastructure — because most average citizens cannot afford it.
China now has about 46,000 miles of expressways — a close second to the United States — with plans to build that out to 112,500 miles by 2030. Almost all of the expressways are toll roads.
But, Zhao said, the United States still has three times as many cars as China.
“There’s no free lunch,” Zhao said. “For people to use these roads, they must pay money. . . . If China has so few automobiles, who pays the money to build the expressways?”
“China should build roads,” he said, “but not expressways.”
Zhao has been similarly critical of the high-speed rail system, arguing mainly that it is too expensive to build — at least three times the amount of normal train lines — and that the ticket prices are still far too high for average Chinese to afford. Echoing his argument for highways, Zhao said, “China should build more rail — but not high-speed rail.”
One reason behind the high-speed-rail construction was to make moving freight more efficient. Currently, freight and passenger trains share the same rail lines, slowing the transport of precious commodities such as coal. The high-speed rail lines were intended to take the passengers off the existing lines.
But the cheapest high-speed train ticket costs far more than the most expensive ticket on the older, slower trains, and passenger demand for the high-speed trains has been light. On lines where slow trains have been replaced, many traveling home for the Chinese New Year holidays now prefer to travel by car or bus — clogging the highways — instead of paying the ticket prices for the bullet trains.
Zhao is far from the only critic of the pace of the government’s infrastructure building, and many are now speaking openly.
“I believe we have already built too much infrastructure,” said Xu Xiaonian, a professor of economics and finance at the China Europe International Business School in Shanghai. “By too much, I mean ahead of economic development and ahead of demand.”
With high-speed rail, for example, Xu said, “it’s very clear. We have built too much. We are way ahead of what the economy needs.”
Pointing to the number of new airports and “highways without traffic,” Xu compared the building boom to the proposed “Star Wars” missile defense system championed by President Ronald Reagan in the 1980s: “Tomorrow we may need it — is that an argument?”
Planning for the future
Other economists here make the opposite case — a rapidly developing country with a population of more than 1.3 billion people may not need the infrastructure now, but they will in the future. As an example, they point to the series of ring roads — the equivalent to the Capital Beltway — circling Beijing. At the time the third, fourth and firth ring roads were being constructed, they looked like a waste, with few cars. Now, most of the ring roads are jam-packed all times of the day and night.
The bigger problem, say many here, is not the infrastructure but the debt incurred to build it.
The government’s 4 trillion renminbi ($586 billion) stimulus package was actually a series of government bank loans pumped into the economy on easy terms. Local governments set up “special funding platforms,” or quasi-independent investment entities to borrow the money at low cost, and the money was used to build the airports and train stations and, in many cities, new commercial districts. Many localities used land as collateral to borrow the money.
But now there is concern about a hidden “debt bomb” among China’s local governments. The debt burden of these investment platforms is estimated to be at least $1.6 trillion (10 trillion renminbi), although some figures put the amount at closer to $2.2 trillion (14 trillion renminbi).
“China has a lot of debt,” said Guo Tianyong, a professor at the Central University of Finance and Economics in Beijing. “For China to have an economic crisis is not unforeseeable.”
The main problem, say many Chinese and Western economists, is that while the spending spree has helped sustain China’s enviable growth rate over the years — and helped the country largely avoid the effects of the 2008 global economic downturn — it has also slowed China’s shift from an investment-led growth model to one sustained by consumer spending.
“China sustained its own growth in 2008 by creating a domestic investment boom,” said Patrick Chovanec, who teaches at Tsinghua University in Beijing. “There’s a lot of concern that’s taken place over the last six months with the sustainability of China’s growth model.”
China’s leaders have spoken openly about the need to shift from an investment model to a consumption model. It is part of the government’s most recent, widely touted five-year plan.
Meanwhile, there has been a change in gears. After the Wenzhou train crash and the earlier sacking of Liu Zhijun, the powerful railways minister, on corruption charges, the development of high-speed rail was slowed and the speeds of the trains reduced.
But much of the building boom goes on. Construction cranes dot the skylines of cities large and small. And the bullet train still traverses up and down the Hainan coast, pulling into one ultra-modern station after another, collecting and discharging its few lonely passengers.