China rail program takes off like a
shot By Olivia Chung
HONG KONG - China has launched its first
bullet train, which has a maximum speed of
250km/h, demonstrating that it is determined to
develop its high-speed railway network.
The new train debuted at 8:30am on January
28, traveling from Shanghai South Railway Station
to the city of Hangzhou, provincial capital of
Zhejiang.
In 2002, China unveiled a 130
billion yuan (US$17 billion) plan for the
construction of a high-speed rail service linking
Beijing to
Shanghai, which would cut the
journey time from 14 hours to five. Consortiums
from Germany, France and Japan have competed for
the project ahead of a predicted explosion in
China's high-speed railway market.
The
Beijing-Shanghai high-speed line - the biggest
project of its kind in China's history in terms of
investment - marks the start of an ambitious
railway-development program, with industrial
insiders estimating that nearly 8,000 kilometers
of high-speed railway have been planned to stoke
the country's economic engine.
However,
last year, Chinese officials began to pour cold
water on foreign firms' ambitions to cash in on
the massive infrastructure project. Minister of
Railways Liu Zhijun told China Daily in March, on
the sidelines of the annual session of the
National People's Congress, that foreign
technology will not be used to build the
high-speed rail link between Beijing and Shanghai.
"We have already reached a consensus on the issue:
the high-speed railway line will be fully based on
our own technology," Liu said.
The trial
operation of the country's home-made bullet train
appears to support Liu's remarks. Insiders say
that if the bullet train runs at its full speed,
it could travel non-stop from Beijing to Shanghai
in a little more than five hours. With
improvement, China could achieve its goal of
establishing a Beijing-Shanghai high-speed link
with home-made trains.
However, the debut
of the Chinese-made express train not only
signifies China's determination to absorb imported
technologies and develop its own, but also offers
opportunities for foreign transport companies to
gain a foothold in the rapidly growing Chinese
rail market.
The bullet train is one of
dozens to link Shanghai, Hangzhou, Nanjing,
Guangzhou and Shenzhen. Bullet trains will also
run between Shanghai and Beijing during the
upcoming Lunar New Year period, when there is
sharp rise in demand for passenger transport.
Because of speed restrictions on the
existing tracks, the bullet trains do not
currently run at full speed. But they are
scheduled to run at 250km/h from April 18, when
another upgrading of the country's rail network
and facilities is set to accommodate high-speed
travel. By then, the travel time from Shanghai to
Hangzhou will be cut to 45 minutes from the
current 90 minutes, and travel from Beijing to
Shanghai will be shortened to 10 hours from the
current 12 hours, with stops in several major
cities in between.
China's rail links
totaled 76,600km by end of 2006. But most of them
were built at least 30 years ago and some even
date back to the early 20th century.
The
economic boom of the past two decades has
generated soaring demand for rail transportation.
In 2006, China's rail network handled 25% of the
world's cargo and passenger travel, although the
country's railway network only accounts for 6% of
the world's total by mileage.
Last year,
China's railway network carried 662.2 billion
passenger-kilometers - 2.7 times that of Japan -
while it carried 2.87 billion tons of freight, a
billion tons more than in the US, and 4.8 times
that in India.
To cope with the
skyrocketing demand for rail transport, the
Chinese government has kept expanding its plans
for rail construction.
The Ministry of
Railways (MOR) in February 2004 announced that
China would spend at least 2 trillion yuan to
expand its rail network by 35% to 100,000km by
2020.
Major construction plans in the
run-up to 2020 include a new
Beijing-Guangzhou-Kowloon link and an east-coast
line linking Dalian, Qingdao, Shanghai, Xiamen,
Shantou and Shenzhen.
Seeing its railroads
running far behind soaring demand, the MOR is now
considering revising its plans to boost total
mileage to 120,000km by 2020.
Although
details of the expanded projects are not available
yet, the blueprint for the regional rail system
seemingly has offered great opportunities for
foreign investors to enter the previously
state-monopolized railway industry, though major
problems remain to be sorted out.
Because
of the government's keenness to develop its own
rail-transport technologies, the question of
technology transfer will become one of the key
challenges that those foreign rail giants wanting
to enter the Chinese market have to deal with.
As Liu indicated, although the government
has preferred to absorb imported technologies to
develop its own technology for the
Beijing-Shanghai high-speed rail link, it also
seeks foreign technology transfers. However,
multinationals are conservative in this regard,
fearing that technologies they transfer to China
could later be used by their Chinese rival to
compete with them in the international market.
To implement its ambitious plan for
expanding the country's railway network, China
badly needs capital. The MOR has estimated that
total investment for the plan will reach 2
trillion yuan by 2020. This means an average of
more than 130 billion yuan will be needed every
year, at least twice the annual investment on
railways of 55 billion yuan before 2006.
Beijing recently said it would open
railway construction and transport to foreign and
private investment. However, incentives and rules
have yet to be worked out. Until then, investors
are likely to remain cautious about entering the
state-monopolized sector.
Given that
prices in rail transport are still tightly
regulated by the government, its profitability has
fallen far behind highway transportation, which
has attracted huge funds from home and abroad for
direct investment and share issues.
To
tackle the problem, the MOF is planning to
increase the transparency of financial operations
in the railway industry, so that potential
investors will be able to get information about
their share of revenues to help them minimize
risks, Wang Yongping, a spokesman for the
ministry, was quoted as saying by China Daily.
Reforms are under way aimed at setting up
a more flexible pricing mechanism. The ministry
plans to restructure some of the state-owned
railway enterprises into join-stock companies.
"For restructured railway companies, as well as
joint-venture railways, there will be a flexible
pricing mechanism where prices can change within
national guidelines," said Wang.
The
reforms are aimed at building a transport price
management system in which the market is the key
player and national guidelines are only a minor
factor, he said.
Besides the reforms, the
ministry is drafting regulations on railway
construction, passenger travel and freight.
For the five years to 2005, the railway
ministry provided more than 90% of the money to
build new railways, with local governments and
companies providing the rest.
In addition,
to lure foreign and private investment,
state-owned railway companies are encouraged to
launch initial public offerings. Daqin Railway Co
became the first rail company to be listed on the
mainland bourse after gaining approval for A-share
IPO in Shanghai last July last year. Before then,
only the Guangzhou-Shenzhen Railway had been
listed in Hong Kong.
Olivia
Chung is a senior Asia Times Online
reporter.
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