Derailed Economic Models Pose a Threat to Rail Safety?

Monday, August 13, 2012 7:32
Posted in category China Logistics

Wenzhou high speed train accident aside, China’s rail road offers perhaps that safest form of transportation in China, but a couple of recent stories suggest that this record may see other accidents due to the fact that many (if not all) of China’s rail investments are built on poor economics.. and are crushing those who are responsible for maintaining the lines.

The China Daily report Subway costs feared to go off the rails sets the stage:

China has spent 39 billion yuan ($6.1 billion) in the past 20 years on its manned space program, which has sent 10 craft into orbit and achieved several notable breakthroughs. However, even that vast sum would only fund construction of 78 kilometers of subway given the current average cost of 500 million yuan for each kilometer. And for most big cities with a subway, or planning a subway, 78 km is a mere fraction of a network.

[…] Experts are concerned that the construction could strain the resources of some city governments and plunge them heavily into debt. They are also worried that the cities may not have taken account of the possible long-term costs of operating and maintaining the network. Moreover, there are concerns that the large-scale move toward construction has resulted in a shortage of trained professionals, which in turn could lead to reduced safety levels.

[…] Even Shanghai, with a population of 23 million and GDP of 1.9 trillion yuan in 2011, has been dragged into debt. It has China’s longest subway network, with 11 lines totaling 425 km by January. […] Ying Minghong, board airman of Shanghai Shentong Metro Group Co, said that only Line 1 is profitable. The income from ticket sales and advertising covers its daily operating costs, but is not enough to pay for maintenance or the interest on its loans. The city’s other lines are in debt. reports 12 railways found to be of inferior quality

An August 1 document from the Ministry of Railways states that a total of 12 railways are facing major construction safety problems, […] According to the document, these quality flaws mainly consist of cracks and casts in the tunnel arches; disordered cable wiring design; water leakage and cut corners, which the insider said will severely affect the safety of China’s railways. It is absolutely necessary that measures are taken in order to make correct the aforementioned mistakes.

At the highest levels, it comes as no surprise that investing in rail is expensive. Particularly the metro lines that snake under many of China’s cities.  But the comparison to the space program really puts that 500m RMB / KM into context.  Particularly as I have seen more than 10 lines in Shanghai be built out in my time here, and have enjoyed the experience of riding metros is several other cities where I wasn’t sure the density made sense… but I enjoyed the ride none the less.

Which gets into the meat of the above.

If the economic model of the system were never viable, something I have heard from experts before, then why were these projects built and what will it mean for the long term safety records of these trains which are zipping across the country at 300+km / hr and carrying millions everyday from city to city, door to door.

According to one person whom I recently spoke with, and is an expert on rail investments in China, this situation will ultimately lead to governments who cut budgets in areas they feel can be cut.  Areas like maintenance.  And that as a result, the rail systems that should have had the weakest financial models, and thus not been funded, will see that maintenance related problems will drive failures up.  Failures that on the whole will result in poor performance, but also come with the added risk of catastrophe as well.

while would probably explain why the government is  now looking for suckers investors.

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