traingang

Regarding the figure of “another 10,000 km scheduled,” I was wondering whether this comes from an official planning document or a specific announcement. I’ve seen different estimates depending on which planning cycle or projection is referenced, so I wasn’t sure which source this number was based on.

It is based on the recent announcement for HSR development under 15th Five Year Plan.

On profitability, I completely agree that only a very small portion of the HSR network makes money in pure operating terms. I was just unsure about the estimate of “~2300 km,” since most public discussions I’ve come across tend to refer to the number of profitable lines rather than total track mileage. If there’s a specific source behind this figure, I’d appreciate learning more.

There are only 6 HSR lines that are making profit:

1. Beijing-Shanghai line (aka Jinghu line, 京沪高铁)
2. Guangzhou–Shenzhen–Hong Kong XRL (广深港高铁)
3. Shanghai–Nanjing intercity line (沪宁城际铁路)
4. Beijing–Tianjin intercity line (京津高铁)
5. Nanjing–Hangzhou line (宁杭高铁)
6. Shanghai-Hangzhou line (沪杭高铁)

They all add to ~2300km.

At the same time, I was also wondering (at least on the mainland) whether operational profitability is considered a major issue when weighed against the broader contextual benefits of HSR, such as national connectivity, regional integration, productivity gains, time savings, industrial coordination, and long-term development effects. My understanding was that these wider benefits are often treated as part of the rationale, even when individual lines are not profitable on paper.

Correct. Most public transits are not expected to be profitable, which is why many public transit companies also double as REITs to take advantage of the real estate prices as transit infrastructures are built. The most prominent example right now is Shenzhen Metro that has transfused billions to save the property developer giant Vanke from sinking.

Additionally, many railway companies are being restructured into joint-stock companies to securitize their railway assets as asset-backed securities, in other words, financialization of the public infrastructure to make money. You can read the article from People’s Daily here.

Concerning the central versus local investment shares after the 2019 restructuring, the overall trend you describe seems very reasonable. I was only unsure whether the precise percentages mentioned (such as 9–15%) are published as national statistics, or whether they are drawn from individual project disclosures. If you have documentation or examples, I’d be grateful to read them.

The numbers came from the link I posted in the comment above.

Lastly, on the relationship between HSR construction and the real-estate downturn, I agree that the two are clearly connected. I was just hoping to better understand how much of today’s local-debt pressure is directly tied to rail investment itself, versus broader fiscal issues and the wider property-sector slowdown.

This is a very long story that you can read from my previous effort post here, which really started with the 1994 Tax Sharing Reform. Long story short is that the new tax sharing arrangements prompted local governments to seek non-tax revenues to finance their own budget, and the result was unleashing of the property market, starting from Zhu Rongji’s policy in 1998, accelerated under the 4 trillion yuan stimulus drive in 2007, and the final bang with the 2015 Monetization of Shantytown Redevelopment policy (棚改政策).

Public transits are great ways to stimulate regional and satellite cities growth, and a lot of investment were poured into building new stations to connect the provincial towns and building new cities/residential areas. Some of the areas genuinely benefited from the infrastructure growth, but many others were recklessly built with the local governments competing with one another to boost their GDP numbers and made great career promotions along the way.

The problem now is that there is an oversupply in housing, and with the property prices plunging, the local governments are losing their land premium revenue while having to service a mounting amount of debt taken out for these infrastructure building.

Related to that, I also wanted to ask whether the current local government debt “crisis” is truly as severe as it is often portrayed, or whether some of the discussion may be overstated, especially considering the structure of the debt, the role of state ownership, and the central government’s capacity to restructure or absorb risks if necessary.

Nobody actually knows the true scale of the debt, since much of the debt taken out before 2015 were from shadow banks (LGFVs) and were off the books (at least opaque to the public).

What we do know is that the November 2024 policy to help service the debt (化债 but not sure the exact term in English) was a 12 trillion yuan solution, which

1. Raised the debt ceiling of the local governments by 6 trillion yuan to borrow new money at lower interest rates to pay off the outstanding high interest rate debt
2. Allowed the local governments to raise 4 trillion yuan of municipal bonds to service the outstanding debt
3. At least 2 trillion yuan will be paid per the contracts

This was the last “big policy” being instituted by the central government to help with the local government debt servicing. The exact amount is almost certainly to be much larger than 12 trillion yuan, probably a few times that, since many local governments are still reporting financial distress at the moment.