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The Financial and Economic Assessment of China's High Speed Rail Investments: A Preliminary Analysis

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  • Jianhong Wu

    (Beijing Jiatong University)

Abstract

China has suffered railway capacity constraints for more than several decades and the need for a large increase in rail capacity has been viewed as the primary challenge. The former Chinese Ministry of Railways believed that building a national wide high speed railway (HSR) network was the most efficient solution to China’s rail capacity problems. By 2012, 9 000 km of HSR line has been completed which accounted more than half of the total in the World and the other 9 000 km HSR line is either under construction or in the planning stage. This paper attempts to discuss the initial operational, financial and economic result of such a large scale HSR investment in China where the establishment of an appraisal system for a HSR project is still underway and the public data in need are not available. Based on some trial studies carried out on several HSR projects, however, the paper shows that except for a limited amount of HSR projects in the most developed areas of the country, the initial financial and economic performance of most HSR lines are generally much poorer than expected. The scale of investment seems to be difficult to justify, given that investment in HSR lines is very expensive, especially for those with design speed of 350 km/h, and the high level of debt funding. Moreover the values of time of the ordinary Chinese are still low by European standards. For a developing country planning HSR projects, one lesson that can be learnt from China is that it would be ideal if a comprehensive appraisal can be taken into account before investing in HSR. Such appraisal includes examination of different options for technical and operational standards, timing of investment, construction scale and pace, train operational scheme and service level, pricing and regional development policy (political consideration). At the very least, a step by step development strategy should be adopted to cope with the huge uncertainties and risks.

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  • Jianhong Wu, 2013. "The Financial and Economic Assessment of China's High Speed Rail Investments: A Preliminary Analysis," International Transport Forum Discussion Papers 2013/28, OECD Publishing.
    • Handle: RePEc:oec:itfaab:2013/28-en
    DOI: 10.1787/5jrw4bdd6nvf-en
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    Cited by:

    1. Albalate, Daniel & Fageda, Xavier, 2016. "High speed rail and tourism: Empirical evidence from Spain," Transportation Research Part A: Policy and Practice, Elsevier, vol. 85(C), pages 174-185.
    2. Shao, Zeng-Zhen & Ma, Zu-Jun & Sheu, Jiuh-Biing & Gao, H. Oliver, 2018. "Evaluation of large-scale transnational high-speed railway construction priority in the belt and road region," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 117(C), pages 40-57.
    3. Li, Hongchang & Strauss, Jack & Shunxiang, Hu & Lui, Lu, 2018. "Do high-speed railways lead to urban economic growth in China? A panel data study of China’s cities," The Quarterly Review of Economics and Finance, Elsevier, vol. 69(C), pages 70-89.
    4. Daniel Albalate & Germá Bel, 2015. "La experiencia internacional en alta velocidad ferroviaria," Working Papers 2015-02, FEDEA.
    5. Yang, Xutao & Wu, Jianhong & Zong, Yueqi & Wang, Chao, 2023. "Are China's HSR tariff affordable and economic equitable? An international comparison perspective," Socio-Economic Planning Sciences, Elsevier, vol. 85(C).
    6. Daniel Albalate & Javier Campos & Juan Luis Jiménez, 2015. "“Tourism and high speed rail in Spain: Does the AVE increase local visitors?”," IREA Working Papers 201527, University of Barcelona, Research Institute of Applied Economics, revised Dec 2015.
    7. Jack Strauss, 2017. "Do High Speed Railways Lead to Urban Economic Growth in China?," Proceedings of Economics and Finance Conferences 4807677, International Institute of Social and Economic Sciences.
    8. Li, Hui & Dong, Xiucheng & Jiang, Qingzhe & Dong, Kangyin, 2021. "Policy analysis for high-speed rail in China: Evolution, evaluation, and expectation," Transport Policy, Elsevier, vol. 106(C), pages 37-53.
    9. Daniel Albalate del sol, 2015. "Evaluating HSR availability on Tourism: Evidence from Spanish Provinces and Cities," ERSA conference papers ersa15p288, European Regional Science Association.

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