sounded like a perfect plan -- high-speed trains that would carry passengers at speeds almost equivalent of commercial airplanes.
But now, thanks to government corruption and quality issues, the project
may never arrive at the station.
In February Liu Zhijun, the man in charge of China's $1T USD high-speed rail bid, was fired.
Under investigation on corruption charges, the 58-year-old's departure
signaled the start of some major questions about the future of the project,
which seeks to lay down as much track, in length, as a third of America's
interstate highway system.
This month, amid rumors of trains almost literally derailing, China's Railways Ministry announced that it
would be dropping the top speed of trains from 218 mph to 186 mph. It
would not comment on safety concerns other than to say the issues were
"severe". The slowdown drops China from having the world's fastest trains to being in a virtual
tie with Europe and Japan.
It also announced plans to slow construction and drop ticket prices in order to
try to close a budget deficit. The Railways Ministry owes $276B USD to
Chinese banks and failed to turn a profit in the first three months of the year
-- at a time when it was expected to be turning the corner.
Chovanec, a professor at Tsinghua University in
China states in an interview with The Washington
Post, "They’ve taken on a massive amount of debt to build it."
Zhao Jian, a professor at Beijing Jiaotong
University, says the project could lead to bank failures. He
states, "In China, we will have a debt crisis — a high-speed rail debt
crisis. I think it is more serious than your subprime mortgage crisis. You can
always leave a house or use it. The rail system is there. It’s a burden. You
must operate the rail system, and when you operate it, the cost is very
Some of the funds for the project have been going towards their intended
purchase -- laying rail. Others have been going towards questionable
expenditures like elegant glass and marble for the country's 295 train
stations. And there are rumors of local officials, including a woman in
Shanxi province, setting up companies to take kickbacks from contractors.
Officials on the Beijing-Shanghai line project are accused of accepting $28.5M
USD in bribes. On top of that, the former Railways Ministry
chief, Mr. Zhijun, stands accused of pocketing $122M USD.
"Engineers" working on the vital Beijing-to-Shanghai line actually
had no credentials or formal education. And in March government officials
also found scores of fake invoices, which resulted in the government paying for
Much like the Chinese manufacturing industry's struggles, there are
fears that contractors are also cutting corners with substandard
In order to ensure safety, train tracks must be built with high quality fly
ash, mixed with concrete. But contractors are suspected of using lower
quality ash mixed with other substances, potentially compromising miles of
Despite having the world's second largest economy, China's average yearly per
capita income of $4,300 USD is well below the world average, according to
the International Monetary Fund. One of the
biggest problems facing the train system is that the people of China are simply
unable to pay the prices of tickets, which remain exorbitant by the nation's
The government shut down older, cheaper slow train lines in a bid to get migrant workers to use the new lines.
But the tickets were too expensive and the bid failed -- the workers
turned to the bus system, clogging highways.
China will have another crack at it, next February when the migrant workers
once again return home in a brief exodus. But it remains to be seen if
the government has dropped prices enough to sell tickets -- and if it will be
able to ensure the passengers safely reach their destination.
The Asian giant's struggles are of great interest to the U.S., which is
contemplating a much smaller government-backed high-speed
quote: I have to wonder why our corporations think they will make a profit by moving there.
quote: China's average yearly per capita income of $4,300 USD is well below the world average
quote: Ahh, blame everything on the tax, eh?
quote: LOL, what can the Obama Administration do anything about the fact that Chinese people are willing to accept $3600 a year for a job?
quote: So, let's stop with the bullplop that we have made it 'so expensive to do business in America'. The real problem is that we are not using our TRADE TARIFFS to take into account that China is undervaluing their labor AND their currency.
quote: Because we've driven the cost of doing business here up so high it actually makes SENSE to move to China?