Bullet trains trigger profit growth for railways
ASIA BRIEFING:THIS WEEK’S Asia Briefing comes from the G13 high-speed rail link between Beijing and Shanghai. It covers a distance that used to take 10 hours – now it takes less than half that time.
High-speed rail is increasingly seen as the future of intercity travel in China and, despite some initial problems, it is starting to pay off.
The system appears to have recovered from the damage to its reputation caused by the collision in July last year between two bullet trains that killed 40, and the sacking of rail minister Liu Zhijun on corruption charges.
The 1,318km line runs 90 pairs of trains daily and takes four hours and 48 minutes, making one stop in Nanjing. It travels at a maximum speed of 300km/h, down from the original average speed of 329km/h, as the trains were made to go slower following the crash.
Investment in the high-speed rail network was one of the main elements in China’s spending programme in 2008/09, when Beijing pushed out a four trillion yuan (€490 billion) stimulus to fight the financial crisis. Four of China’s 14 high-speed rail lines have achieved break-even since the bullet trains started full-speed, intercity service in China two years ago.
Ticket revenues have so far matched costs, including debt payments, on several routes, including Beijing to Tianjin, Shanghaito Nanjing, Beijing to Shanghai and Shanghai to Hangzhou, the National Development and Reform Commission (NDRC) told Caixin Online.
An estimated 40 million people took the high-speed train during the bullet system’s first six months, paying a combined seven billion yuan (€850 million) for tickets – an amount pointing to good potential for future profits. Altogether, carriages were 72 per cent full.
The Beijing-Shanghai route is particularly successful, having transported 52.6 million passengers between the two cities last year, while ticket sales on the line were worth seven billion yuan (€850 million) in the first six months of last year.
The line between Shanghai and Nanjing is even more successful than the Beijing-Shanghai route, registering a 380 million yuan (€46 million) net profit on revenues of 3.57 billion (€430 million) yuan last year. Tickets for the journey between China’s top two cities range from 410 yuan (€50) to 1,750 yuan (€212).
A flight costs between 1,000 and 2,000 yuan and takes about two hours, but after factoring in early check-in times, security checks, flight delays and the fact that most airports tend to be located a long way out of town, business travellers are opting for the train and the section is full between Beijing and Shanghai.
Using technology from Japanese and German firms, the high-speed train was developed by China which is now keen to export the technology. It is building high-speed rail technology in Turkey, Iran and Venezuela, and there has been talk of selling the system in the US.
High-speed rail is central to China’s efforts to become more than just a low-cost manufacturer. Spending on the service fell in the first half of this year, but investment is picking up again, with a dozen new projects under way, Caixin reported.
Last year, work began on 70 new rail projects including the Tianjin-Baoding line in Hebei Province.