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China plans to expand its current high-speed rail system into a network of 16 rail corridors by 2030, under a program that serves the dual purpose of providing better transport services for China's 1.3 billion people while also spending hundreds of billions of dollars to support the economy.
But some analysts are questioning the ambitious plan, saying it lacks solid financial foundation and could ultimately saddle the network's operator with huge amounts of debt that it can't repay.
The envisioned high-speed rail grid will consist of eight north-south and eight east-west corridors, and will be completed in 15 years, Fei Zhirong, head of the infrastructure department of the National Development and Reform Commission (NDRC), China's state planner, said at a press conference on July 20.
He added that the grid will incorporate existing high-speed rail lines, such as the one linking Beijing and Shanghai.
When complete, the grid will total 45,000 kilometers in length and connect all provincial capitals and cities of more than 500,000 with high-speed rail service, he said. That would represent more than double the current network, which is already the world's largest with 19,000 kilometers of track at the end of last year.
But such investment decisions, which are often based on centrally planned targets rather than economic realities, may result in huge amounts of idle capacity and equally large debt that will be difficult to repay, said Zhao Jian, an economics professor at Beijing Jiaotong University.
High-speed railroad tracks cost at least twice as much to build as ordinary lines, making it more difficult to earn back investments since they can run only passenger trains, Zhao wrote in a commentary in Caixin this month. The Beijing-Shanghai line became profitable for the first time last year, four years after it began operating, thanks to enormous passenger volume. But most of China's bullet trains are on corridors that are far less popular, and are losing money, Zhao said.
China has used big spending on infrastructure like high-speed rail partly to support the economy as it shows signs of slowing sharply and entering a new growth phase. China also hopes to export its newly gained skills in the high-tech sector by building high-speed rail lines for other countries, and has signed a few contracts to date.
The NDRC's latest ambitious targets show Beijing has no intention of slowing down its investment in railroad building. China's fixed-asset investment in the railway system has exceeded 800 billion yuan ($120 billion) annually in the past few years, and the government plans to continue that rate by spending 3.8 trillion yuan on railroad infrastructure between 2016 and 2020.
This article first appeared on english.caixin.com
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