Faced with a financial and public relations disaster, China put the brakes on Liu’s program. On April 13, the government cut bullet-train speeds 30 mph to improve safety, energy efficiency and affordability. The Railway Ministry’s tangled finances are being audited. Construction plans, too, are being reviewed.
Liu’s legacy, in short, is a system that could drain China’s economic resources for years. So much for the grand project that Thomas Friedman of the New York Times likened to a “moon shot” and that President Obama held up as a model for the United States.
Rather than demonstrating the advantages of centrally planned long-term investment, as its foreign admirers sometimes suggested, China’s bullet-train experience shows what can go wrong when an unelected elite, influenced by corrupt opportunists, gives orders that all must follow — without the robust public discussion we would have in the states.
The fact is that China’s train wreck was eminently foreseeable. High-speed rail is a capital-intensive undertaking that requires huge borrowing upfront to finance tracks, locomotives and cars, followed by years in which ticket revenue covers debt service — if all goes well. “Any . . . shortfall in ridership or yield, can quickly create financial stress,” warns a 2010 World Bank staff report.
Such “shortfalls” are all too common. Japan’s bullet trains needed a bailout in 1987. Taiwan’s line opened in 2007 and needed a government rescue in 2009. In France, only the Paris-Lyon high-speed line is in the black.
This history counseled caution about introducing bullet trains in China, where the typical passenger was still a migrant worker, not a businessman rushing to a meeting. To be sure, there was an economic case to be made for upgrading China’s lumbering rail system: It would free up limited rail capacity for freight trains, thus reducing truck traffic on congested roads. Beijing’s initial feasibility studies envisioned the gradual introduction of trains that would move at a maximum 125 mph, according to Caixin, the Chinese economic magazine.
But Liu Zhijun — part Cornelius Vanderbilt, part Sammy Glick — took over the rail ministry in March 2003 and urged officials to aim for speeds above 200 mph. “Seize the opportunity, build more railways, and build them fast,” he wrote.