Expats love to rant about how wonderful China’s infrastructure is – reliable wireless in cities, extensive subway systems, and incredible cell phone reception – many of us are particularly fond of the rail system. The high speed segments in particular are quite nice. These aren’t free, however, as this article indicates that Minsheng Bank analysts concluded that the Railway Ministry currently has Rmb1tr in liabilities (representing an assets to debt ratio of over 55%). Last year the servicing cost was approximately Rmb40bn; which incidentally is enough to build the oft-discussed maglev between Hangzhou and Shanghai (cementing the former’s status as just another one of Puxi’s suburbs).

When the ultra-high speed was opened between Shanghai and Nanjing had its inaugural opening, the Railway Bureau shut down the high speed trains on the same route, so that people had to take the slightly faster (and significantly more expensive) option. Locals indicated that this was a face saving maneuver. Tickets on the newer, faster trains are seen as expensive in general, and its a hot button social issue (particularly since those it affects most – migrants – are in the least capable position to shoulder price increases).

The answer of course is that 8% growth will soak up all of the current costs of infrastructure development (at least until this is finished). While this particular bit of Sinocentric-doctrine is rarely called into question, it would be interesting to examine more information on costs and projected revenues. Given that national GDP is somewhere between USD5-9tr (depending on your preferred methods of measuring exchange), this is a very significant number. HT IS.

The Wuhan-Guangzhou highspeed rail line opened on December 26. The maximum speed is apparently around 400km/h, with an average speed of 300km/h; taking three hours to travel the ~830km (as the crow flies) from Wuhan to Guangzhou, making it the fastest train in China aside from the 8 minute Pudong airport maglev. Some of the major stops shown below, full route map here.

It will be interesting to see how urban corridors develop within China since major infrastructure decisions like these are driven by various bureaucratic mechanisms, several steps removed from underlying market forces. I’m sure there are a lot of people traveling this route, but would it be more lucrative / “productive” if placed somewhere on the coast? Examining changes in plane ticket prices might be one way to approximate an answer, since there is presumably some level of substitutability for travelers: apparently, Wuhan-Guangzhou flights fell to about 50% (now at 250-300Y) of the pre-bullet train price. The same happened to Wuhan-Shanghai flights when the Wuhan-Shanghai bullet train was opened earlier this year. The trains are usually full (particularly between Shanghai and Hefei, Anhui), with some excess capacity on the flights, suggesting at least some slack in capacity utilization at the moment; ignoring highways. Optimists are betting this will change given urbanization trends; which certainly holds true for the 2005-2009 period, where only four years ago there was lots of excess capacity (around 50%) on both trains and planes. Though somewhat borish, accurately defining existing levels of urbanization in China at present has major consequences, since many of these projects are designed to integrate into nation wide transportation systems and (projected) trends for 2020, rather than current levels of demand. It would also be very interesting to see how financing for these projects is conducted; rather what percentage of costs they are able to recoup with ticket purchases.