China's High-Speed Trains Coming Off the Rails

Hugh Pickens writes "The Washington Post reports that China's expanding network of ultramodern high-speed trains is coming under growing scrutiny over costs and because of concerns that builders ignored safety standards in the quest to build faster trains in record time as new leadership at the Railways Ministry announced that to enhance safety, the top speed of all trains was being decreased from about 218 mph to 186. Without elaborating, the ministry called the safety situation 'severe' and said it was launching safety checks along the entire network of tracks. Meanwhile China's Finance Ministry announced that the Railways Ministry continues to lose money as the ministry's debt stands at $276 billion, almost all borrowed from Chinese banks. 'In China, we will have a debt crisis — a high-speed rail debt crisis,' says Zhao Jian, a professor at Beijing Jiaotong University and longtime critic of high-speed rail who worries that the cost of the project might have created a hidden debt bomb that threatens China's banking system. '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 high.'"

Re:Safety Standards?

[perpenso]

Oh really? You mean there are existing safety standards for new technology? And here I thought it was just the engineer's conservative estimates...

What new technology? High speed rail is over a hundred years old. The billion passenger mark was hit in the 1970s. I think there is sufficient track record to establish standards.
http://en.wikipedia.org/wiki/High-speed_rail [wikipedia.org]

Re:Wishfull thinking for USA

[Anonymous Coward]

Melamine in baby formula and animal feed to spike low protein counts (http://www.time.com/time/world/article/0,8599,1856168,00.html)
Coal mine accidents in disproportionate amounts when you compare China's coal production to that of other countries (http://www.chinadaily.com.cn/english/doc/2004-11/13/content_391242.htm)
Melted down anything remotely resembling metal in the late 50s (The Great Leap Forward) to try to match the United Kingdom in steel production - an arbitrary goal set by Mao Zedong - naturally, the product was useless (http://en.wikipedia.org/wiki/Backyard_furnace)

China has come a long way since the end of Republican Era but has also consistently cut corners whenever possible. This isn't an issue of sour grapes, simply one of history.

Bubbles in China

[cold fjord]

'In China, we will have a debt crisis — a high-speed rail debt crisis,' says Zhao Jian, a professor at Beijing Jiaotong University and longtime critic of high-speed rail who worries that the cost of the project might have created a hidden debt bomb that threatens China's banking system. '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 high.'"

Unfortunately, that apparently isn't the only bubble in China:

How Big Is the Chinese Property Bubble? [seekingalpha.com]

In times of crisis alternative economic models become more appealing. Since the USA, the beacon of capitalism was the epicentre for the current crisis and the Chinese economy escaped relatively unharmed, there is a certain logic in asserting that the central planners in China have the right economic prescription.

But as James Chanos and others have pointed out, centrally planned economies lead to malinvestment and nowhere is that malinvestment more manifest than in China’s Property market. Consider John Mauldin’s November 24th, Outside the box interview with Vitaliy Katsenelson. Katsenelson compares Japan’s property bubble of the late 1980s to modern day China and the results aren’t pretty.....

China's credit bubble on borrowed time as inflation bites [telegraph.co.uk]

The Royal Bank of Scotland has advised clients to take out protection against the risk of a sovereign default by China as one of its top trade trades for 2011. This is a new twist.

It warns that the Communist Party will have to puncture the credit bubble before inflation reaches levels that threaten social stability. This in turn may open a can of worms.

"Many see China’s monetary tightening as a pre-emptive tap on the brakes, a warning shot across the proverbial economic bows. We see it as a potentially more malevolent reactive day of reckoning," said Tim Ash, the bank’s emerging markets chief.

Officially, inflation was 4.4pc in October, and may reach 5pc in November, but it is to hard find anybody in China who believes it is that low. Vegetables have risen 20pc in a month.

China: the coming costs of a superbubble [csmonitor.com]

China may seem to have defied the recession and the laws of economics. It hasn't. When China's bubble bursts, the global impact will be severe, spiking US interest rates.

The world looks at China with envy. China’s economy grew 8.7 percent last year, while the world economy contracted by 2.2 percent. It seems that Chinese “Confucian capitalism” – a market economy powered by 1.3 billion people and guided by an authoritarian regime that can pull levers at will – is superior to our touchy-feely democracy and capitalism. But the grass on China’s side of the fence is not as green as it appears.

In fact, China’s defiance of the global recession is not a miracle – it’s a superbubble. When it deflates, it will spell big trouble for all of us.

It seems likely that the world has a few more financial tremors coming.

Re:"must operate"

[Purpleslog]

The phrase you are looking for is the "Sunk Cost Fallacy".

Re:Yes, safety standards.

[CaptainZapp]

Actually France' TGV also has an exceptional track record regarding safety :

TGV Accidents [wikipedia.org]

Germany's ICE, however, had a bad accident with 101 fatalities (details here [wikipedia.org]), which was caused by a series of issues, but most notably by a faulty wheel design.

Nevertheless, high speed rail on a global scale has an exceptional safety record.

Re:Yes, safety standards.

[realityimpaired]

The Eschede accident did happen on normal tracks, but the faulty wheel design would have affected a train only travelling on high speed tracks as well... they replaced the wheels with a design that had a rubber buffer between the "tread" and the hub. The idea was that it would be quieter and more comfortable. It was quieter, but what they didn't count on was that the rubber would deform as it got hot, and it created a sort of wobble on the wheel tread. After enough kilometers, that wobble created enough fatigue in the wheel that it failed catastrophically, causing the derailment and accident.

The mistake was in using a wheel type that was originally designed for the Paris subway, and was never designed for the kinds of speeds that a high speed train, or even a normal above-ground train travels. Since then, they've gone back to solid wheels, and focused on improving the suspension in the cars in order to improve ride comfort. It's telling that Eschede was the only major accident in the world with the high speed train network, though, and that nothing like it has happened since. :) (well, yet, thanks to China....)

Re:Are you sure what the joke is?

[poity]

The thing to realize is that the Chinese motivations are totally different from Western companies'. In China, everything is about working for the good of the nation, not yourself or your company.

Chinese American here, that's some highly romanticized weaboo-esque delusions there.

Re:Are you sure what the joke is?

[tnk1]

It doesn't matter. His terminology may not be used in the way you think of it, but his central premise is correct.

China doesn't have people "working for the good of the nation", it has a market economy with significant input from the State. The people on the market side of it are just as corrupt and without regard for long-term consequences as the people in the US. The difference is that this is China's "Gilded Age" or close to it. Infrastructure needs to be built and they are building it. The downside of it is that you have the sweatshops, the corruption, and the political patronage you had in the US and elsewhere.

The State does own large enterprises, but it is fairly hands off with them, at least from the political side. What it does provide is a walled off environment with lax enough enforcement of things like patents and copyright so that their people can get a leg up by either buying, borrowing or stealing tech from other countries.

I'm not passing judgment on China here, the US had a lax IP regime before it became a top-level economic power as well. China is basically trying to be the US of 100 years ago today, and with their growth, demand for fuel and raw materials, and pollution levels, I would say they are succeeding.

The best way of looking at China today is much like a fascist state of the past, insofar as the State is taking a "coordinating" and "partner" role with a bunch of loosely controlled private businesses, and there is a significant nationalistic stance. That label is not an exact fit, of course, but the parallels are there.

The major difference is that China is not as aggressively expansionist, although again, it is not clear if this is simply a result of their current military backwardness.