Rail’s speedy recovery

Liu Zhijun, the former railways minister, will probably be remembered as the man who introduced high-speed rail to China.

Unfortunately, his legacy was marred by a horrendous accident. Liu – who was in charge of the national railway system for much of the last decade – was blamed for the Wenzhou train crash, which killed 40 people in 2011. The tragedy led to mass recriminations about the speed with which the new high-speed network had been built – the suspicion being that corners had been cut on safety in the construction rush. The ministry’s attempts to immediately bury the derailed train didn’t help either, smacking of a cover-up.

The story then took a fresh turn when Liu – described in the New Yorker as “small and thin, with bad eyesight and an overbite” – was detained for corruption. Part of the case against him was that he had been allegedly juggling 18 mistresses.

Liu was expelled from the Communist Party and his case was passed recently to the judicial authorities.

But his replacement, Sheng Guangzu, is making headlines for better reasons, as the Ministry of Railways comes back into the fold.

In a recent national railway conference, Sheng announced that China’s high-speed rail network – measuring 9,356 kilometers as of the end of 2012 – was the longest in the world, reports People’s Daily Online.

In late December, China launched the lengthiest individual line, which takes travellers from Beijing to the southern city of Guangzhou in just eight hours. Last year was a period of recovery for the railway system, as the central government upped its financial contribution to the ministry. Its budget rose by 50% in 2012 to Rmb600 billion ($96.4 billion) – after Premier Wen Jiabao was petitioned by local governments and struggling train manufacturers. The increase was necessary: the 12th Five Year Plan targets 120,000 kilometres of total track by 2015, compared to 98,000 by the end of last year.

Back in late 2011 (see WiC127), we reported on how the Ministry of Railways was straining under the weight of Rmb2 trillion in debt. Unable to borrow more, large numbers of projects were then suspended.

But CBN describes how several government departments took “mercy” on the Ministry of Railways last year, with bank lending to railway projects increasing markedly. Last year, China Development Bank lent the ministry more than Rmb100 billion.

Rules on borrowing in the capital markets were flouted too. The securities law prohibits an entity from selling corporate bonds if the issuance leads to total debt climbing above 40% of net assets. But the National Development and Reform Commission gave the go ahead to the ministry to ignore the threshold, with more than Rmb400 billion in bonds sold last year.

The resurgence in railway spending fits into a broader picture of a recovering economy. Last week, China reported a 7.9% increase in gross domestic product for the fourth quarter of 2012, the first year-on-year pick up in pace for two years.

The bounce back in infrastructure investment was a key driver of the economic rebound, reported the Financial Times in an article entitled “Rail helps China back on track”.

In the wake of the Wenzhou crash, there was also a renewed focus on safety issues. Trains were slowed and defective systems looked at. It was probably also recognised that the demonisation of the railways had gone too far. After all, in the same year as the bullet train crash China’s roads killed a far more grisly 62,000 – that’s almost 170 people per day (suggesting more Chinese likely died driving on July 23, 2011 than were killed in the Wenzhou rail accident).

And there were few rail deaths in 2012. The only major accident that WiC was able to source took place last August. And no passengers were involved: a freight train killed nine people crossing a line.

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