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May 2013 - China Rail

Give the contract to the Chinese

The latest proposed Australian Government plan for high speed rail between Sydney and Melbourne via Canberra (and including up to Brisbane) was released for discussion on ~10 April 2013 at an expected cost of $114bn with the first leg (to Canberra ready by 2030) and completion by 2053. Involving 144km of tunnels of which 67km of tunnel would be through Sydney.

Give it to the Chinese has to be the obvious comment !

On Wednesday 26 December 2012, China opened its longest high speed rail link being 2298km from Beijing to Guangzhou through 28 cities and 5 provincial capitals, the 8 hour journey can be completed from 9am to 5pm, at a first class fee of 1383Rmb (~A$221, or 0.6018Rmb/km) or second class 865Rmb (or 0.3764Rmb/km).

At that time in December, the high speed rail-line map was produced in the China Daily as shown on Google Earth in Figure 1, with some distances such as Shanghai to Hong Kong 1650km, Shanghai to Kunming 2264km, Shanghai to Chengdu 1922km, Beijing to Harbin 1612km and Beijing to Shanghai 1387km.

There are to be 176 high speed trains for the Beijing to Guangzhou line out of China's total of 408, compared to France's 494, Germany's 350 and Japan's 359. By 2015, China expects to have ~120,000km of rail connecting all provincial capitals and town/city populations >0.5m.

China's current rail network is the 2nd largest in the world at 98,000km, with the current 5 year plan from 2011 to 2015 calling for a 25,000km increase in the rail network (along with 82 new airports and the expansion of 101 existing airports). China rail has ~2m employees, transports about 4bt of cargo per year and has ~1.9bn national passenger journeys per year (the subways/metro are in a separate category).

China's railway investment has been estimated as currently accounting for ~2% to 3% of China's GDP growth. Hence the restructure of the debt-laden Ministry of Railways into China Rail probably impacted on China's GDP growth in Mar Qtr 2013.

Some construction costs were also given, as on 28 September 2012, the Zhengzhou to Wuhan line was opened, taking now only 2 hours to travel the 536km for a cost of ~$9bn (or 57bnRmb). When we/ERA first visited China in 2003, China had zero intercity high speed rail, and was then just starting to build its freeway road connections. Most of China's new high speed rail is actually on surface - not tunnelled.

Detail was given in early April 2013, on the new 921km long Harbin to Dalian line that was opened in late 2012 and initially restricted (during winter from December to April) to 200km / hr so the journey takes 5hr 18mins, but is expected to reduce in summer to about 3.5hours. The faster train costs were expected to increase to $104 (645Rmb) for first class and 404Rmb for 2nd class. China rail still expected to have some lower cost slow trains at winter speeds being 455Rmb for first class and 239Rmb (~$40) for 2nd class. That's $40 for a 921km journey lasting about 5 hours.

It should also be recognised that Figure 1 is just work in progress. It doesn't show the new line that is expected to be operating in 2014. That's the 1776km link from Lanzhou in Gansu, west to Urumqi in Xinjiang.

It is easy to understand where "give the contract to the Chinese" comes from. The Sydney to Melbourne high speed rail link has been in discussion for at least 20 years.

Disclosure and Disclaimer : This article has been written by Keith Goode, the Managing Director of Eagle Research Advisory Pty Ltd, (an independent research company) who is a Financial Services Representative with Taylor Collison Ltd.

Figure 1. China's High Speed Rail Network in December 2012

  • Written by: Keith Goode
  • Wednesday, 01 May 2013

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