Chinese bullet train a bust

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Armand2REP

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A Bullet Train with Chinese Characteristics
News Analysis
By Li Tianxiao
Epoch Times Staff Created: Jan 14, 2010 L



A newly launched bullet train undergoes a test at the new railway station in Wuhan, central China's Hubei province on December 24, 2009.


Less than two weeks after the launch of the Wuhan-Guangzhou “bullet” train on Dec. 26, public sentiment towards entering the era of bullet trains suddenly changed from elation to dejection.

The Wuhan-Guangzhou bullet train is said to be the world's longest, fastest and most costly railway system, and an obvious opportunity for the Chinese Communist Party to show off its political and economic achievements. However, to the convenience-minded public, the expensive fares and reduction in ordinary train traffic have instead made this new form of public transport unaffordable, just like, many say, housing prices. Chinese now mock themselves for being exploited.

A look at the fare prices explains these sentiments. Fare for a first class seat is 780 yuan (approximately US$114), a second class seat is 490 yuan (US$72). This is not only three times higher than ticket prices for the cheapest seat on a normal train, but no cheaper than air tickets. Normally, the airfare from Guangzhou to Wuhan is around 400 yuan (US$58), while during off peak periods it is only around 300 yuan (US$44). On Dec. 26, it even dropped to 180 yuan (US$26). Furthermore, the bullet train stations at the two ends, Wuhan and Guangzhou, are far from the city centres. Once the cost of connecting to the train is included, the total cost to commute by bullet train is exorbitant. The majority of railway passengers on the Wuhan-Guangzhou line are farmers from Hubei, Hunan Province, etc. During the Lunar Chinese New Year in Spring, to the millions of farmers who are short of cash rather than lack of time, they queue up for several days and nights in the bitter cold just to buy a cheap train ticket. A trip on the bullet train would cost the equivalent of one month's worth of living expenses.

Fewer Travel Options

Because of the launch of the bullet train, 13 ordinary short-distance railway lines along the Wuhan-Guangzhou route will stop operating. At the same time, point to point routes from Wuhan to Guangzhou, Wuhan to Shenzhen, and Wuhan to Changsha will gradually stop operating. Obviously this is a case of using political power to force the public to accept the new railway system. This means that those with a low to medium income will be caught in the dilemma of either not going home for the Chinese New Year or tightening their belt to save up for train tickets.

Four days after the Wuhan-Guangzhou line commenced operation, the average occupancy rate has been less than 40 percent. Trains running before 8 a.m. and after 6 p.m. have the largest number of unsold seats every day, with an average of more than 1,000 seats out of a total of 1,200 seats.

Thus, despite the era of bullet trains being heralded by officials, it does not mean that the majority of Chinese citizens can afford to ride the bullet train. The contrast between ticket prices and the public's spending power is too great. This is similar to the situation of exorbitant property prices existing alongside humble abodes. The rich who belong to the minority can afford to catch a plane or ride on bullet trains. The vast majority can only look at airplanes and bullet trains and sigh. In 2008, the monthly disposable income of town and city dwellers in the whole of China was only 1,315 yuan (US$192). The average monthly disposable income of workers in Guangzhou city was 2,109 yuan (US$309) whereas in Wuhan it was 1392 yuan (US$204). Disposable incomes of those in many small to medium sized cities along the Wuhan-Guangzhou rail are even lower. A young man working in the Pearl River Delta region has to spend 980 yuan (US$143) to travel a thousand kilometers to and fro on a bullet train ride in order to go back to his hometown in Hubei for Chinese New Year. This is equivalent to wages of half a month or a month. In the U.S., an airfare from New York to San Francisco—travel distance of more than 4,100 kilometers, only costs US$249. This is only 7 percent of average wages. In comparison, ticket prices for China's bullet train are set too high and the spending power of the masses is too low.

On the surface, it seems that the Communist regime has set a high price for the bullet train fares in order to recover its investment. Total investment in the Wuhan-Guangzhou railway is 110 billion yuan (US$16 billion). The CCP has said that it must recover its costs in ten years. This means that every year, returns must exceed 10 billion yuan (US$1.46 billion). Therefore ticket prices must be set around 500 yuan ($74) to reach this goal.

Does the CCP desperately need this sum of money? Not necessarily. In 2009, the public transport expense incurred by government officials was as high as 150 to 200 billion yuan ($22 billion). Including food and overseas expedition expenses, these three expenses together add up to 900 billion yuan, making up 30 percent of the country's total administrative expenses. Therefore, if the regime exercises a little restraint in spending, it would not be difficult to recoup the 110 billion yuan investment in the bullet train system. Corruption and squandering funds, however, are staple perquisites for communist cadres.
Crony Capitalism

In reality, there are two reasons for setting the high bullet train fare. One is that the CCP has totally disregarded the low spending capability of the masses. If it did, it could have reduced fare prices and allowed more time for the recovery of funds invested. If the time for investment recovery is extended to 22 years, then annual turnover needs to be more than 5 billion yuan. Average fare price then needs to be 170 yuan to reach this goal. However the regime did not want to consider this option.

Secondly, on the surface the implementation of the bullet train is beneficial to the public. In reality, it is robbing the masses through exorbitant fares and giving monopolized state enterprises and local governments the opportunity to reap profits. The construction of the bullet train should not be purely a commercial investment. It should be using tax payer's money to alleviate tax payers’ transport woes, especially during the Chinese New Year holidays. But in concrete actions, the regime has created a flow of wealth towards a few train manufacturers and road infrastructure companies via state policy. These big monopolized enterprises have reaped benefits from being awarded with contracts. At the same time, local governments can attract investment through improved transport systems and therefore increase their incomes. Local government and monopolized state enterprises have benefited, but the costs of investment have been transferred to the public in the form of high ticket prices. This is a typical example of crony-capitalism, the CCP robbing the people.

The CCP claimed that building the new bullet train system would boost China's GDP growth, but it is simply a mean to gloss over its poor investment strategies. In October 2008, the CCP approved a 2,000 billion yuan investment in building railroads, which includes 1,200 billion in construction projects (including the Wuhan-Guangzhou bullet train). The development of the bullet train system is projected to reach 18,000 kilometers in 2020. The problem is that the benefits of the investment are restricted to cement, steel, train industries, and local government. It does not lead to an increase in public spending power. On the contrary, it has taken away public funds from medical care, education, old age pensions etc. If civilians perceive that there is no safeguard in the areas of medical insurance, medical expenses, education and so on, they will cut back spending on daily necessities. The claim that building the bullet train will boost domestic demand is actually nonsense.

Although the hardware of the Wuhan-Guangzhou bullet train system is in the league of developed countries, there have been frequent accidents, and the service is still at the level of less-developed and autocratic countries. On Dec. 29, the bullet train on the route from North Guangzhou to Wuhan experienced a device failure triggered by passengers smoking in the carriage. It was three hours late as a result. Subsequent trains were disrupted and thousands of passengers were affected. Many passengers became agitated while the train stopped operating, however the crew did not seem to know anything and instead locked the passengers in the carriage. On Dec. 30, there was a malfunction on another train heading towards Guangzhou and it had to return to Changsha, causing a delay of more than an hour. On the night of Dec. 29, another incident happened. Eight boxes of abandoned explosives were found below a bridge on a section of the Wuhan route. Apparently it was an intentional threat. It seems that disgruntled civilians have found a new means to express their anger and dissatisfaction in the troubled society.

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amoy

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LOOK AT the positive side of infrastructure investment

China gets on board railway project to speed up economy
(AFP) – Dec 4, 2008

BEIJING (AFP) — Travelling at 330 kilometres an hour on one of China's fastest trains, businessman Ren Wenzuo had nothing but praise for a multi-billion-dollar plan to spin a web of new rail links across the country.

"People nowadays want to have convenient ways of travel, and with more fast trains across China, they will bring convenience to everyone," he said on board the service from Beijing to neighbouring Tianjin.

Ren, 47, said a work trip to Tianjin now took him one day to complete, compared with two before the new line was introduced in August, when the train service took twice as long.

More is to come as China recently approved a two-trillion-yuan (300 billion dollar) investment in its railway infrastructure over the next two years in a bid to spur growth in the face of the global economic crisis.

Longer term, China is aiming to have 120,000 kilometres (74,500 miles) of tracks laid down by 2020, up from 79,000 today, deputy railway minister Lu Dongfu told reporters last month.

Investing in infrastructure is a good way to spur growth amid the current economic woes, said Hu Xingdou, economics professor at the Beijing University of Technology.

"The drop in exports is a situation that is very hard to change, consumer demand cannot be spurred very quickly, so investing in infrastructure becomes quite an effective method," he said.

China's economy is slowing dramatically, with the World Bank predicting the country's growth rate will be just 7.5 percent next year, the lowest in nearly two decades.

China made a similar move at the end of the 1990s amid the Asian financial crisis by investing heavily in the road network across the country.

The huge cash injection in the rail system is expected to boost employment and demand for raw materials, and promote real estate as land and towns near the new railways are also developed.

"I estimate these investments in railways could contribute as much as two percent to the annual GDP," said Hu.

But more than a way to spur growth in the face of the financial crisis, the railway investment is a much-needed cash injection in an industry that has been relatively neglected.

"China's railways have long lagged in development, so rail transport is the bottleneck of the nation's economic and social growth, the weak point of the transport industry, and urgently needs faster expansion," said Lu.

China's railway network is already one of the most extensive in the world, but it has come under pressure as the nation's economy has boomed, giving many of the country's 1.3 billion people more opportunity to travel.

Chinese New Year is a perfect illustration of the bottlenecks that grip the country's railways, when scenes of havoc take hold at stations throughout the nation as people desperately try to get a place on a train to go home.

China's vast territory, full of natural resources such as coal that need to be moved from far flung regions to the cities, also highlights the importance of the railway network in the country.

The nation is currently [B]only able to satisfy around 35 percent of applications for freight transport[/B], according to Wang Fang, China transport coordinator for the Asian Development Bank.

"If the rail system is improved in terms of its capacity and its service, the overall economy can benefit from cost savings, time savings, for both cargo and passenger transport," she said.

But Joseph Cheng, professor of political science at the City University of Hong Kong, sounded a note of warning on focusing too heavily on infrastructure investment to spur economic growth at the expense of more important priorities.

"This is high time for China to spend some money on social services -- education, services for the elderly, medical care, and not only infrastructure projects," said Cheng.
 

mattster

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Its not a bust. They just need to lower the prices.
Their plan on amortizing the cost of the project in 10 years is too unrealistic. It should be more like 30 years, and then they can drop the price by 50-60%.

To be fair, Epoch Times is a New York based Falun Gong newspaper run by Chinese immigrants.
As you know Falun Gong believers are heavily persecuted and jailed and even killed in China for their beliefs.
So naturally Epoch Times folks try to whack Chinese CCP every chance they get. They hate the guts of the CCP party.

Many of their criticisms in their paper are very valid and true, but occasionally they get a bit carried away.
Sometimes you have to take what they say with a "grain of salt".
 

no smoking

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Great, now Epoch time become the your informaiton source? You must be kidding me.

We all know what the attitude of Fa lun gong behind this news paper: Whatever CCP do must be bad!

Now I know how you pour so much wrong information in other thread.
 
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Yusuf

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Its more of reporting what's going on. If the facts are wrong, then back it up with other facts with its source. If the price of a train ride is high and gets reported, what's the fuss about? Looks like the chinese can't take any criticism of any kind nor can it bear any analysis on what's going on.
 

badguy2000

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guy, keep on blahing.

BTW, today, another 800-KM-long high speed railways is finished with a speed of 350 Km/hour.
 

badguy2000

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just keep on your talking and talking while CHinese are working and working.

you India have lost the past 3 decades for your meaningless blah.

if you don't change your mentality and keep ,you will lose another 3 decades.
 
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Yusuf

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Its the CCPs big headed decision to go for this just to show off to the world its money power and invest in something that won't give it returns. Investments are made on sound business decision and not to satisfy egos. By all means you can have these things if your people can afford it and its a viable project. If not its a waste. But who will question the CCP?
 

no smoking

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What is the fact? Or What kind of fact you will accept as truth?
The fact is the whole rail just in operation for several month, you already got your conclusion!
 

Koji

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Its the CCPs big headed decision to go for this just to show off to the world its money power and invest in something that won't give it returns. Investments are made on sound business decision and not to satisfy egos. By all means you can have these things if your people can afford it and its a viable project. If not its a waste. But who will question the CCP?
Why jump to conclusions so fast? I bet you'd call the Hubble Telescope the biggest failure ever!
 

Koji

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Hubble Telescope only cost a fraction of this blunder.
It's merely a pricing issue, and the population density in China nearly gaurantees success of this bullet train. It's just a matter of time for CRH to titrate cost of a ticket and demand.
 

amoy

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If the price of a train ride is high and gets reported, what's the fuss about?
There're other transportation means in competition. Actually the air fare was sharply down when the Guangzhou-Wuhan bullet train came into operations. the marke force of supply-and-demand has been in its full play for their pricing.

invest in something that won't give it returns. Investments are made on sound business decision and not to satisfy egos.
Not always true. Public programs or projects are not always after PROFIT in connection with 'basic' utlilites just like education. For example city bus costs only RMB1 (USD1=RMB6.78) each trip per person in my city, it's definitely not PROFITABLE. And metros - never profitable except Hong Kong MTR which earns its way through real estate development. And there're metros galore under construction in China. Some may argue it's kind of 'socialist' but it seems a common practice worldwide.
 
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amoy

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Since the normal rail lines are being shut down, we can expect that farmers will be flying instead of taking high-speed rail.
Man, they're new high-speed railways instead of upgrading existing 'normal' railways. Besides railways are also for freight transportation (coal etc.) too. And in the last quotation from AFP there has been a far larger demand than supply previously. U don't know how congested it was in China every year especially before/after holidays, and in case of shortage of coal for example (mostly produced in the north or west, while largely needed in southern and coastal areas). Perhaps in India people don't count on railway that much or your energy supply is more diversified so that u don't feel the pain so acutely.

That may be how it works in China, but in France the TGV is all about making a profit. If a line doesn't make money, they shut it down.
That also goes back to how different countries (or social systems) think of 'public sector'. In China railway is not fully commercialized. Besides it all also depends on your view on whether such utilities should necessarily be profit-driven.

There're also debates whether to commercialize things such as urban water supply, medicare etc. which live on subsidies from taxpayers. Personally feel it's really hard to measure infrastructures by profit, in view of efficiency gained, and their long-term merits. For instance electrical supply to mountainous villages or roads built to remote rural areas, hardly any return generated on investment.
 
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badguy2000

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Zhengzhou-Xi'an highspeed railway,505 KM long, 352KM/hour
opened several days ago.

it cost only 35.2 billion RMB(5 bllion USD).

if the high-speed railways were to be built in USA or Europe, it would cost 50 billion USD.
 
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Yusuf

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Keep on pumping public money in infrastructure without a way to earn is not good in the long term. In india all major projects especially highways, airports are private built on a build own operate or built, operate, transfer basis. india has made good highways in the last few years, all private and all tolled.
The new airports are private owned and charging each passenger for developing it.

You cannot have the socialist agenda anymore. One big country collapsed under its weight 20 years ago. China too cannot rest on its billions and keep making things that are unviable.
 

Yusuf

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By the way, the country that made the hubble 20 years ago could afford that and much more. it had and still has one of the highest per capita income to afford anything under the sun.
 

Yusuf

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india too has plans for gettin the bullet trains. Our previous rail minister identified the possible routes and started the feasibility studies. We are still awaiting the complete feasibility and viability report so that the projects can go ahead.
 

amoy

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india has made good highways in the last few years, all private and all tolled.
The new airports are private owned and charging each passenger for developing it.

You cannot have the socialist agenda anymore. One big country collapsed under its weight 20 years ago.
Most Chinese highways are tolled but seldom 'privately' run. It's too early to predict these bullet trains won't make profit someday.

Though no longer a 'whole-hearted' socialist follower, I do doubt whether private entriprises can afford to make such LONG-TERM investment on such a scale which may last xx years before any return. By the way one of 'sideline' benefits of investment on infrastructure is it generates employment, as well as demand on raw products like steel, cement...

That's perhaps a role the government should play -
[edit] Neo-Keynesian economics
Keynes published The Means to Prosperity, which contained specific policy recommendations for tackling unemployment in a global recession, chiefly counter cyclical public spending.
 
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p2prada

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That may be how it works in China, but in France the TGV is all about making a profit. If a line doesn't make money, they shut it down.
France has little or no growth. China grows by 9-10% on an average. So, a little loss in the beginning does not hurt as much. The growth of the Bullet Train will obviously be slow in the beginning. Once China continues to grow at its current pace, the population will be able to handle higher fares. Also, expect the govt to reduce fares too. It will not be difficult once the frequency of the trains is doubled. This will reduce fares considerably. It is only the beginning.

I remember in Bangalore when they introduced the Volvo buses, the fares were quite high for a few years. Now it is very low making it affordable to many. There are a lot of poor people in Bangalore, but it doesn't take away the fact that a lot of rich people are there too. Same in China, if the poor cannot use the bullet train at least the rich can.

Planes are sh*t expensive both in time and money, this makes the bullet trains a more viable means of travel. Reduced waiting time, reduced alighting time, no need of waiting for baggage, no check in or check out, no waiting for nothing, no looking at stup*d air hostess showing us how to wear an oxygen mask etc etc . You just walk in, sit down and walk away. Chances of delays are reduced considerably too. If such a train is introduced in India, I would take it instead of a plane.

You guyz are looking at just one article and deduced that the bullet train is a failure in China. This is a long term investment. You don't get the cake the minute you put it in the oven. Give it a few more years and this investment will help maintain a 10% growth for more time.
 

badguy2000

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France has little or no growth. China grows by 9-10% on an average. So, a little loss in the beginning does not hurt as much. The growth of the Bullet Train will obviously be slow in the beginning. Once China continues to grow at its current pace, the population will be able to handle higher fares. Also, expect the govt to reduce fares too. It will not be difficult once the frequency of the trains is doubled. This will reduce fares considerably. It is only the beginning.

I remember in Bangalore when they introduced the Volvo buses, the fares were quite high for a few years. Now it is very low making it affordable to many. There are a lot of poor people in Bangalore, but it doesn't take away the fact that a lot of rich people are there too. Same in China, if the poor cannot use the bullet train at least the rich can.

Planes are sh*t expensive both in time and money, this makes the bullet trains a more viable means of travel. Reduced waiting time, reduced alighting time, no need of waiting for baggage, no check in or check out, no waiting for nothing, no looking at stup*d air hostess showing us how to wear an oxygen mask etc etc . You just walk in, sit down and walk away. Chances of delays are reduced considerably too. If such a train is introduced in India, I would take it instead of a plane.

You guyz are looking at just one article and deduced that the bullet train is a failure in China. This is a long term investment. You don't get the cake the minute you put it in the oven. Give it a few more years and this investment will help maintain a 10% growth for more time.
the highspeed railways through France-UK tunnel is reported to be not profitable,isn't it?

the construction of Highspeed railway is a revolution .

highspeed railway will completely change CHinese lifesytle,just as railways Changed the lifestyle of Britishmen in 19th century and Expressways changed the lifesytle of yankees in 1950s.

however, indian people here still blah "highspeed railways is a waist of money"....just keep on .

after india was the loser of the railway era and expressway era, India will be the loser of "highspeed railway era" again.

Repeatedly told you not to bring off-topic and drag India into it just few posts above. Now cool your heals for a week. User banned for a week.
 
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