The Chinese High-Speed Train Network No One Else Really Wants

Discussion in 'China' started by Wisemarko, May 20, 2018.

  1. Wisemarko

    Wisemarko Regular Member

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    May 18, 2018 8:00 a.m. ET
    By Trefor Moss, WSJ
    PANG-ASOK, Thailand— Li Guanghe has built some of the most technically complex railroads in China. Now he faces his toughest challenge yet: working abroad to deliver a flagship rail project in Thailand that could make or break China’s hopes of selling high-speed trains abroad.

    Exporting high-speed rail is one of the ambitious elements of President Xi Jinping’s Belt and Road initiative, which aims to upgrade trade and transport networks from Africa to the Pacific. But despite throwing its diplomatic weight behind high-speed rail, China has struggled to convince would-be partners to commit to the costly technology.

    Singapore Express
    China is planning to link Kunming to Singapore by high-speed rail, with a route that passes through Pang-Asok.
    [​IMG]

    After years of stalling, Thailand in November started work on the $5.5 billion first phase of a high-speed railway that Beijing hopes will eventually form part of a China-to-Singapore route—a potentially lucrative prize for Chinese rail contractors. Now the heat is on Mr. Li to complete the initial 157-mile stretch connecting Bangkok with the city of Nakhon Ratchasima.

    “There’s a lot of pressure,” said Mr. Li, a chief engineer with state-run China Railway DesignCorp. , and the man in charge of the project. Construction vehicles rumbled over the soil of this freshly turned site in Pang-Asok, a small rural town in northeast Thailand surrounded by cornfields and foothills.

    “The China-Thailand railway is an important part of making the Belt and Road initiative successful,” Mr. Li said. “We want this project to be the best it can be.”

    China’s domestic high-speed network is the world’s biggest, spanning over 15,000 miles. The World Bank credits the massive public-works effort with boosting China’s socio-economic development. Construction at home is set to wind down over the coming decade, however, sharpening China’s interest in exporting railways—preferably sooner rather than later.

    Chinese diplomats are “making the sales pitch everywhere,” said Jonathan Hillman, a fellow at the Center for Strategic and International Studies, a U.S. think tank. In doing so, they don’t always pause to consider whether the countries they’re pitching high-speed rail to really need it, he said.

    Thailand and Laos are the only places where China is making concrete progress, and in these countries Chinese officials needed a decade of negotiations to extract firm commitments from their reluctant counterparts.

    Li Guanghe is the man in charge of the rail project in Thailand that could make or break China’s hopes of selling its high-speed trains abroad. Photo: Trefor Moss/The Wall Street Journal

    The proposed 2,200-mile Pan-Asia Railway would run south from China to Singapore, via Laos, Thailand—its 1,000-mile central section—and Malaysia. The system would be completely new; there is no high-speed rail in Southeast Asia today.

    The network was originally conceived by the Association of Southeast Asian Nations, but “China is the one pushing for it to happen now,” according to Agatha Kratz, an adviser at the Rhodium Group consultancy who has written on China’s so-called railway diplomacy. “It’s made the plan its own.”

    The project has been plagued by doubts over passenger demand and lack of popular support. “I won’t be able to afford a ticket on the high-speed trains,” said Sompot Kaewlaharn, a 53-year-old laborer in Pang-Asok. The old trains are slow, he admits, but like many rail services in Thailand, they’re also free to use.

    “It seems the government’s doing this because they want to curry favor with China, because China’s powerful,” he said.

    That view is echoed by a Thai official with knowledge of the negotiations, who said China leaned heavily on the Thais to ensure the railroad went ahead.

    A model of a Chinese high-speed bullet train sits on display in Pak Chong, Thailand, Dec. 21. Photo: Li Mangmang/Xinhua/ZUMA Press

    The Thai government under Prime Minister Prayuth Chan-ocha first approved the China-backed high-speed plan in 2014, the year the former general overthrew Thailand’s elected government. The move came amid ambitious promises by the new leadership to overhaul the country’s aging infrastructure.

    Then came the collapse of talks about how much interest Thailand would have to pay on Chinese loans to fund the railway. In 2016, Mr. Prayuth disappointed Beijing by announcing that Thailand would self-fund the first phase and use Thai contractors, relying only on China for equipment and technical assistance.

    “The Thais did everything they could to delay,” said Ms. Kratz.

    The Chinese pushed back. At the G-20 Summit in Hangzhou in late 2016, which Mr. Prayuth was attending at the hosts’ invitation, he was harangued by successive Chinese officials unhappy with delays in getting the project launched, according to the Thai official, who was present.

    Over the course of the summit the Chinese diplomats wore Mr. Prayuth down until he agreed to push the start button, the person said.

    China’s Ministry of Foreign Affairs and a spokesman for Mr. Prayuth didn’t respond to questions.

    A construction crew does ground-preparation work for the high-speed railway line, in Thailand’s Pang-Asok earlier this year, which will run parallel to an existing track. Photo: Trefor Moss/The Wall Street Journal

    Mr. Li landed in July with a 58-month contract and orders from Beijing to get the railway built. He leads a team of 50 Chinese specialists and 400 Thai contractors, some of whom were working on a hot February afternoon to flatten the first two-mile strip of earth.

    Mr. Li once built a notoriously difficult railroad between the Chinese cities of Yichang and Wenzhou across boggy, mountainous terrain. The Thai project is relatively straightforward, he said, but here the difficulties are cultural and political, rather than technical. Operating as a foreign guest makes for agonizing progress, he said.

    Mr. Li’s senior partner in the project, Veerayuth Kaewsawang, a project engineer for the State Railway of Thailand , agreed that it can be painstaking work as they discuss every little twist and turn in the route through translators. “We negotiate about almost everything,” he said.

    While China has piled pressure on its neighbors to support its high-speed rail ambitions, its desperation to land orders has given smaller countries leverage.
     
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  3. nimo_cn

    nimo_cn Senior Member Senior Member

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    Indonesia recently reconfirmed its commitment to HSR project assisted by Chinese, soon Chinese bullet trains will run across southeast Asia.
     
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  4. rockdog

    rockdog Regular Member

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    Of course, building a HSR need at least three factors:
    1. mid level developing nation with strong central government.
    2. there are important economic hubs worthy to connect.
    3. easy for land acquisition.

    There's why India is really hard for building even one real HSR, and China would export lots of normal railway to Africa, like Tanzania-Zambia railway, but not HSR.
     
  5. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    Not even China has made HSR profitable. China Railway's debt load is now 5.04 trillion yuan and costs 540.5 billion to service it. With only 1 trillion yuan in revenue the debt pile just keeps on climbing.

    http://www.chinabankingnews.com/201...-load-exceeded-5-trillion-yuan-first-quarter/
     
  6. jat

    jat Regular Member

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    nope, reason why China exports infrastructure is because its excessive. Other wise, there will be a larger crash. Its basically taking weak, corrupt nations money, while building them infrastructure not completely necessary. Believe me, local populations are not happy, that drivers, laborers are Chinese.
    India India land acquisition is hard. Funding and everything else, especially when there is demand, happens. India hopefully comes up with better solutions than bullet trains, perhaps hyperloops and more.
     
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  7. jat

    jat Regular Member

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    what about the Japanese investments? They provide better technology and have some work in bullet trains in thailand. They are the ones providing higher speeds on HSR and better engines. Fore me I would love to see Chinese bullet trains and Japanese trains compete in these markets. But I would love to see Indian cars compete with Korean and Japanese automakers.
     
  8. rockdog

    rockdog Regular Member

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    Infrastructure means government support, long term investment, profit/loss insensitive.
    If domestic banks still willing to lent money, it means the government provides enough credit to HSR company.

    For last 10 yrs, the HSR deeply changed people's mind on time/distance. On side it brings prosperity to lots of medium/small cities along the railway, another side it avoiding China purchase 1000+ Boeing/Airbus A320/737 level of planes.

    In my company, i would send development team to my Shanghai office, 1100km away within 5 hours, with $USD40 each person. They departed at 7AM, and start to work in Shanghai at 2PM in urgent case. I really appreciated the HSR.
     
  9. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    With debt service costs at 54% of revenue China Railway is a zombie corporation. The state might be willing to prop it up as a strategic asset but no other nation on Earth would do it at the high cost of $85 billion a year and climbing. The French railway has a similar problem of $12 billion but is caused by labour unions and is being abolished and reorganised to lower cost. China Railways must decentralise to lower its debt load before it becomes too much for even the state to prop up.
     
  10. rockdog

    rockdog Regular Member

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    The Beijing-Shanghai HSR for last 5 years are gaining very nice profit, the HSR company even plan to build 2nd Beijing-Shanghai HSR...

    It implies that, the HSR is quite complicated issue, social impact, financial arrangement, geographical balancing ... Only use debt factor is very superficial way of thinking.

    In fact except Hong Kong subway, most subway system in the world are really bad on financial. But still it's the mandatory thing to all the major cities.

    All the internal debts are relatively easy to sustain, just like Japan; 40% of Japan annual fiscal income are used to pay the interest of huge debt, but still the Japanese economic still can be evaluated as healthy...
     
  11. nimo_cn

    nimo_cn Senior Member Senior Member

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    quote from the article:
    According to observers the divergence between China Railway’s debt levels and its business performance is due to the unique nature of railway investment.

    “With regard to economic models, railways aren’t goods where you see instant results,” said domestic commentator Xie Weifeng (谢伟峰) in an article on the sector published last year. “They often need at least ten years or even longer in order to generate a return on capital, or even profitability.”
     
  12. nimo_cn

    nimo_cn Senior Member Senior Member

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    Japan was competing in the Indonesian HSR project, apparently Japanese lost.
     
  13. jat

    jat Regular Member

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    Apparently you don't know about subcontractors. Majority of the work is survey and track laying. The technology nonetheless is still pioneered by Japanese for the most part. I believe the reason why Japan lost, is because they provided their resources and won the India market.
     
  14. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    An HSR between two wealthy tier 1 cities might make a profit, but one example out of hundred failures doesn't translate to success much less account for the debt servicing required to be paid. Based on the payment to debt ratio the servicing cost is over 10% APR and with debt soon to hit $1 trillion USD it is unsustainable.
     
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  15. rockdog

    rockdog Regular Member

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    10 years ago, before the Beijing-Shanghai HSR start, people argued that it will be a debt trap.
    5 years ago, Beijing-Shanghai HSR gained huge profit.
    Now, people are discussing there should be anther Beijing-Shanghai HSR, and make this two lines to be list on stock market.

    In next 10 years, the rest of Tier 1 cities and Tier 2 cities would copy the same path. But if we do it as late as now, the cost of HSR will be at least tripled.

    Please don't use financial model of France to compare China, the developing nation means everything are rapidly changing, plus HSR is not only a traffic tool. For China's western part like Xinjiang and Tibet, and Southeast Asia, railway is more a geo-political weapon; do people really expect making profit for weapon?
     
  16. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    The Beijing-Shanghai HSR cost $32 billion to build and has $1.1 billion gross revenue, once overhead/taxes are deducted and debt servicing set at 10% APR it will only take 100 years to pay off. This is the most successful of all Chinese HSR projects so the future for the whole is not very bright. One only needs to look at China Railways approaching $1 trillion debt bomb as proof
     
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  17. rockdog

    rockdog Regular Member

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    According to the news:
    http://finance.ifeng.com/a/20160726/14639644_0.shtml

    Your data is WRONG

    “截至2015年末,京沪高铁公司利润总额66.6亿元,净利润65.81亿元。”

    The investment of Beijing-Shanghai HSR $32billon, and the RPOFIT of 2016 is $1.1billion; and the cost already included tax, debt, interest, salaries... It's the most profitable HSR in the world...

    There will be 20-40 yrs for return all the investment, for the infrastructures the ROI is OK. This railway is going to be list on stock market, since it's attractive to build second one!

    2. There are 11 shareholders of this HSR, and some of them were later comer as investor, they are not that stupid, if it really needs 100 yrs.

    3. "沪宁、宁杭、广深、沪杭、京津等5条高铁线路都被媒体证实在2015年实现了盈利。"
    From 2015, there are also 5 HSR lines are profitable, according to the authorities.


    I have a small advice. if you really feel you are right, you would check who are those shareholders/investors of those HSR lines, and try to "Short" those companies on stock market.

    As accurate of your words on this forum last 8 years for shorting China, you must invested a lots on stock market. I believe you are very rich now, the gain of "short China" must be times more than your veteran pensions. Am I right?
     
    Last edited: May 21, 2018
  18. Wisemarko

    Wisemarko Regular Member

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    8071F7EE-810D-4B54-AE31-32ACB675A2DE.jpeg

    Shanghai-Beijing HSR my trip.
     
    Last edited: May 21, 2018
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  19. nimo_cn

    nimo_cn Senior Member Senior Member

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    it looks like first class coach, just my guess.
     
  20. Wisemarko

    Wisemarko Regular Member

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    Yes. It was. Very good experience! I also took meglev from Shanghai airport:
     
  21. lcafanboy

    lcafanboy Senior Member Senior Member

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    Railways receives defective locomotives from Chinese firm
    [​IMG]
    Will replace 16 newly inducted locomotives that have ‘under-frame cracks’
    By our correspondent
    Feb.09,2016
    LAHORE:

    Pakistan Railways is going to replace 16 newly inducted locomotives brought from China-based CSR Ziyang Locomotives Co Limited after engineers found serious defects in the locomotives and declared them unsafe to operate, especially for the passenger segment.

    “Railways’ engineers have found under-frame cracks in 16 locomotives; which means they [Chinese party] haven’t provided us with a quality consignment as per our agreement,” said Railways Minister Khawaja Saad Rafique in a press briefing on Monday.

    With PIA off track, Railways earns extra

    “Chinese engineers are scheduled to reach Lahore on Tuesday morning for inspecting the locomotives, after which we will make a final decision,” he added.

    The locomotives were lying idle for the time being, however, Rafique said it would not be possible for the railways to replace the entire fleet in one go as it would hurt the recovery of the corporation.

    “I am seriously concerned about the revenue targets which we have set for the financial year 2015-16. What we can do is that we could use the defective locomotives in freight operations and replace them gradually,” he said.

    In 2013, the railways signed a deal with CSR Ziyang for the procurement of 58 diesel-electric locomotives, half of which had 2,000 horsepower and the other half had 3,000 horsepower.

    The deal was finalised at a price of $48.431 million. First consignment of five locomotives reached Pakistan on April 5, 2014. By January 2015, the company delivered all the locomotives.

    The induction of the new locomotives helped the railways streamline its operation and earn revenues of Rs31.92 billion, Rs3.95 billion in excess of the target in fiscal year 2014-15.

    Keeping in view the pace of past growth, the management had increased its revenue target to Rs38 billion for fiscal year 2015-16, Rs5 billion more than the target suggested by government advisers.

    Rafique said he was upset after hearing about the defects in locomotives. “Everyday we face new challenges and everyday we try to overcome them to keep the railways on the path of progress,” he added.

    “Railways is establishing a designing wing within its mechanical department, moreover it is also establishing a research and development department to overcome such issues in the future.”

    These important departments are missing from the railways and are now being established on an urgent basis.

    “In future, we will hire a third-party consultant before signing any deal that involves the purchase of locomotives. Without the consultant’s recommendation, the railways will never approve locomotive designs.”

    Talking about privatisation, he said privatisation was never considered for the Pakistan Railways, at least not during his tenure.

    He claimed that there was a perfect relation between the management and different unions. “No one interferes in other’s matters, however, we do consider each other’s suggestions and opinions,” he said.

    Later on Monday, the railways launched an upgraded version of the Business Train. It has spent Rs70 million to refurbish the train and increase its passenger capacity to 958 from 486.

    Pakistan Railways prepares for tougher challenges ahead

    Prior to the upgrade, the maximum daily revenue the railways could earn was Rs3.2 million. However, with the upgrade, it is expected to earn Rs3.95 million on a daily basis, with a gross fleet of 8 Economy, 2 Air-Conditioned Standard and 3 AC Business coaches.

    Published in The Express Tribune, February 9th, 2016.
    https://www.google.co.in/amp/s/tribune.com.pk/story/1042818/unsafe-railways-receives-defective-locomotives-from-chinese-firm/?amp=1

    Yeah, last time you did export to porkistan and this is what happened.

    Chinese railway just like any other chinese products is junk.

    Hindi saying,
    Chali to chaand tak nahi to Shaam tak.

    Meaning, if it works will go to moon and if not only till evening.:pound::pound::pound:
     
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