Zhao Jian

Not a profitable idea by any yardstick

The Beijing-Shanghai high-speed railway will shorten the travel time between the two cities by several hours, and it is just one of the many high-speed railway lines planned across the country. The government plans to build several other lines linking Beijing with the cities in western China in the next few years.

This has excited some scholars, who think high-speed railway links will not only reduce travel time between destinations considerably, but also boost industries, and thus reduce China's heavy reliance on exports through the sea and correct the regional economic imbalance.

Such assumptions exaggerate the value and contribution of high-speed railway to national development. People who think so ignore the basics of economics, which tell us that high-speed railway cannot produce such miraculous results.

High-speed railways will definitely upgrade the transportation system in the western region, but they will not help develop mass labor-intensive industries there. The reason for that is simple: most of the countries neighboring China's western region cannot afford to import more goods in bulk.

Market is about an economy's consuming capacity, rather than geographical location. Since Central Asian countries have a relatively low per capita GDP, they cannot act as substitutes of the markets in Western Europe or the United States.

Besides, to develop industries in the western region that produce on a large scale, the central government needs to invest heavily and ensure that a huge number of people migrate from other parts of the country to the west. For one, such a development will increase the pressure on the already fragile ecology of the west and give rise to dissent among local ethic groups in the region.

Both to assume that there will be mass migration to the western region is against market logic, for it can only be realized through state power. The flow of people to the country's eastern and southern coastal regions over the past three decades has been accompanied by economic growth, reflecting the power of agglomeration economies.

As the 2009 World Development Report of the World Bank said: "There is no good reason to expect economic growth to spread smoothly across space The most successful nations also institute policies that make basic living standards more uniform across space. Economic production concentrates, while living standards converge. That is uneven growth and inclusive development."

Low population density is a serious problem that development of high-speed railways in the western region faces.

Considering its price and speed, high-speed railway is more competitive than flights for short distances, say between 300 and 800 kilometers, but less attractive for passengers who travel more than 1,000 km. For instance, Urumqi, the capital of the Xinjiang Uygur autonomous region, is 3,100 km away from Beijing and 2,500 km from Xi'an. There is no reason why businesspeople and tourists would choose high-speed railways over planes, because it would demand more time and higher costs.

What the western region needs most is not high-speed railway, but simply more freight trains. The biggest obstacle for people in the west is inferior means of freight transportation. The money spent on a high-speed railway linking the west to the rest of the country can be used to build at least two double lines on the same route, which would remove the bottleneck that freight transportation faces and integrate the region into the country's wider market.

Investment by nature should seek returns, and investment in high-speed railways is no exception. We expect it to bring benefits by saving time for passengers, but only when such benefits exceed the astronomical cost of building high-speed railways can it be of value. Otherwise, it would become a burden for China's transportation system. With its high cost and high prices, a high-speed railway is suitable only for regions with a relatively developed economy and high population density. It would be a luxury for relatively backward regions.

Take the existing high-speed railways as an example. Seventy-three pairs of trains run on the Shanghai-Nanjing line every day, while only 12 pairs operate on the Zhengzhou-Xi'an line. That means the transportation capacity of the Zhengzhou-Xi'an line is being wasted, and we can only expect the situation to be worse between Xi'an and cities further west. The least we can do is to prevent actual losses before talking about strategic arrangements.

The author is a professor of economics at Beijing Jiaotong University.

(China Daily 06/20/2011 page9)