In the nineteenth century the railway industry was a symbol of Britain’s industrial might. For the Chinese it was another indicator of the nation’s humiliation and the limits of its sovereign power.
The first commercial railroad in China was a nine-mile track built in 1876 to improve transportation between Shanghai and the nearby port of Woosung. However, the groundbreaking line was constructed against the wishes of the government. The Qing administration was worried that railways would help foreign powers reach further into China. Vested interests like the shipping and haulage firms who made a living carrying goods, didn’t want their businesses affected either. Some locals were worried that the Western technology would bring bad feng shui as well.
Nonetheless, the Hong Kong-based trading firm Jardine Matheson led an investor group called the Woosung Road Company that acquired land in the area, supposedly to build a road. Instead it laid railway track, without official permission.
The Woosung Railway commenced operations in 1876 and the weak Qing government initially did nothing but watch. A year later it ‘nationalised’ the railway for 285,000 silver taels – or five times the amount the foreign owners had invested – and dismantled it.
History looked to have reversed course this week with the first bullet train symbolically departing Hong Kong (still home to Jardines 142 years later) for mainland China.
By plugging the territory into China’s 25,000-kilometres of high speed railway, the Guangzhou-Shenzhen-Hong Kong Express Rail Link is expected to integrate Hong Kong more deeply into southern China, especially a region that is now being designated as the Greater Bay Area.
The new rail service has stoked congratulation and controversy. By sending its own law enforcement officials across the border to operate in Hong Kong’s West Kowloon terminus, China is reasserting its sway over the former colony, whose founding is considered by historians as the starting point of the “century of humiliations” that followed the Opium Wars.
The naysayers look at the terminus plan differently, however, seeing it as further evidence of Hong Kong’s eroding autonomy, and a departure from the “One Country, Two Systems” setup promised by Beijing before the 1997 handover.
Yet both the pro-Beijing and anti-mainland camps in the city seem to agree on one thing: the project is a game changer and, for better or worse, Hong Kong will never be the same again.
Did the first train leave on time?
The last time that Hong Kong unveiled a piece of mega infrastructure – its new international airport Chep Lap Kok 20 years ago – the opening was dogged by disaster. The baggage handling system broke down and flights were disrupted by computer problems. The fiasco put pressure on the post-colonial government, just a year after it had taken control.
The opening of the Hong Kong section of the Express Rail Link was blunder-free by comparison. The first train, named Vibrant Express, departed the West Kowloon terminus at 7am on Sunday and in less than 20 minutes it was in Shenzhen.
A day earlier, Hong Kong Chief Executive Carrie Lam and Guangdong Governor Ma Xingrui had presided at the grand opening ceremony. “Hong Kong has entered the high-speed rail era,” Lam proudly proclaimed. “What is more important is the connection between the people of mainland China and Hong Kong. I encourage everyone to travel more to mainland cities using the Express Rail Link, and to understand their culture and development.”
According to Xinhua, some 500 passengers, including media, took the first train, marvelling at the smooth and speedy service.
To compare how the new train measures against the older service, the South China Morning Post asked its reporters to travel from Hong Kong to Taikoo Hui, a flagship property development of Hong Kong’s Swire Pacific in central Guangzhou. The bullet service goes to Guangzhou South Station, while the original slower train terminates in Guangzhou East in the main business district of Tianhe. So anyone taking the high-speed service needs to add a longish taxi ride if their destination is in Tianhe. The verdict: the SCMP found that the total journey time to reach Taikoo Hui was still 13 minutes faster on the bullet train than the existing train service. “It was a comfortable and fast journey, but the cost was quite high,” the Hong Kong newspaper concluded.
There were some glitches on debut day in West Kowloon, with about 76,000 passengers travelling north on day one. People who bought tickets from the state-run internet platform had to queue for hours to collect them, mainly because popular payment systems such as AliPay and WeChat Pay were not yet available in the dispensing machines at the Hong Kong end of the line.
The Express Rail Link is over 141km long. Although the Hong Kong section accounts for just 26km of the line, it came at a cost of more than $12 billion, having suffered repeated delays and budget overruns. The People’s Daily agreed that the building programme hadn’t been a smooth ride. “The Guangzhou-Shenzhen section of the Express Rail Link commenced operation in December 2011 but the Hong Kong section only started construction in January 2010. The first train has been delayed for nearly seven years,” the newspaper wrote.
Where does the border sit?
Excited travellers wanted selfies next to a thick yellow strip that marks the demarcation line inside West Kowloon Station between Hong Kong’s territory and mainland China’s. Many took photos standing with one foot on either side. However, despite entering the “mainland zone” of the terminus, they could still share the images on WhatsApp and Facebook, social media networks banned elsewhere in China.
This so-called co-location arrangement has been one of the thorniest political issues for the new railway in Hong Kong. In fact, how to design the border formalities at the Hong Kong terminus had threatened to derail the project, not just delay it.
Under the Basic Law, Hong Kong’s constitutional document, the territory enjoys autonomy over immigration and customs procedures. But the shared facility at West Kowloon now has immigration and customs officials from mainland China stationed inside Hong Kong. Opponents of co-location say there is plenty of space for immigration facilities at arrival points in Shenzhen and Guangzhou, and the Chinese government is making a political point by putting the checkpoints in Hong Kong. “It’s like a Trojan horse infiltrating the city through the belly of the railway system,” pro-democracy lawmaker Claudia Mo told the Wall Street Journal.
Chinese officials have countered that the co-location deal makes things more convenient for passengers, and that similar arrangements are deployed for transport links between the United States and Canada, and the UK and France.
The Hong Kong government delayed a decision on the issue until late last year, when China’s top legislative body endorsed the co-location plan.
Lawmakers in the city subsequently rubber-stamped the proposal in June, “leasing” more than a million square feet at the station to the Chinese government for a token fee of HK$1,000 ($127) a year.
Despite the caution in Hong Kong, the central government in Beijing has never hidden its ambitions to fuse the former colony into a “one-hour zone” of the Pearl River Delta, which comprises Hong Kong, Macau and parts of Guangdong province. A 55km tunnel-bridge linking Hong Kong with Macau and Zhuhai will also open within the next two months, cutting travel times from Hong Kong to Zhuhai from three hours to 30 minutes. Both the railway and the bridge are important projects in the Greater Bay Area plan, a cluster of nine Chinese cities in Guangdong together with Hong Kong and Macau. Total GDP in the region is nearly Rmb30 trillion ($4.4 trillion). But critics are cautious about the new connectivity. Although beneficial in economic terms, they fear the plan will exact a punishing price: the loss of Hong Kong’s relative autonomy and distinct way of life.
How else might the railway shake things up?
When the Woosung Railway was launched, one of its stiffest opponents was China Merchants Steam Navigation Company, which was set up in 1873 to consolidate the shipping industry in Zhejiang and Jiangsu (the company still operates as a state-owned enterprise under the same name).
The Express Rail Link is likely to make things difficult for existing businesses today as well.
One of the first to suffer will be the operators of cross-border bus services, some of them run by state-owned enterprises such as China Travel. According to the Hong Kong government, about 100,000 commuters take buses from Hong Kong to Shenzhen every day and a substantial number of these passengers seems likely to switch to the high-speed trains (one positive: an estimated reduction of 47,000 tonnes in carbon emissions every year).
The new train service offers services between Hong Kong and 44 destinations in mainland China, of which 38 are long-haul. The time needed for a train journey to Beijing will be cut to about 9 hours from 24, for example, while Wuhan can be reached in less than five.
High-speed rail has proven a threat to the Chinese airlines since the bullet trains started to come into operation about 10 years ago, especially for journeys shorter than 800km. The airline industry is plagued by congested airspace and limited landing slots, which results in regular flight delays. The railway network offers more predictable journey times.
Bloomberg expects the Express Rail Link to pose similar challenges to Hong Kong’s flagship carrier Cathay Pacific. “With 11 of Cathay Pacific Airways’ more than 20 China destinations overlapping with high-speed rail, the Hong Kong carrier stands to be the biggest casualty,” it warned, explaining that a bullet train ride can cost less than half the price of a ticket on Cathay to the same destination.
Passengers also save the time and hassle of the pre-boarding security checks required at airports.
The counter argument is that Cathay could benefit from a more vibrant Greater Bay Area. Last December, the 11 cities in the planned megalopolis signed a tourism promotion pact with the hopes of bringing in more foreign visitors. Cathay will be reasoning that the improved travel times will encourage more customers from Guangdong to cross the border to the airport in Hong Kong. Cathay’s parent firm Swire has been upping its bets too in cities like Guangzhou with property projects such as Taikoo Hui. Indeed, the British conglomerate’s rental income from China now exceeds that coming from its Hong Kong malls.
How about Hong Kong’s wider property market?
The West Kowloon terminus spans more than 11 hectares and a new commercial landmark is set to be built around it. According to the government’s land auction plan, the site above the station will be put up for sale in the near future. The expectation is that it will house three skyscrapers with a total floor area of nearly four million square feet (sqf). At the prevailing market price of about HK$30,000 per sqf, the land will cost its developer over HK$100 billion.
Singtao Daily says this giant development will be another game changer for the city’s commercial property market. Given its proximity to the bullet train services, the project is expected to draw tenants from Central, the main business hub, where Hongkong Land (a unit of Jardines) has been the biggest landlord for decades. The impact could also be felt in Hong Kong’s residential market. Singtao Daily reports that property prices in districts close to West Kowloon have already been inflated by the so-called “high speed train effect”. The price for some apartments close to the station have climbed over 70% over the past two years.
However, if you try Googling “Greater Bay Area”, or even “high speed train” in Chinese, you’ll find the top search results are sponsored ads from real estate agents for residential projects in cities such as Guangzhou and Zhongshan.
For the time being, Hong Kong’s home prices are substantially higher than most Chinese cities. But that price gap could narrow should Hong Kong be integrated more deeply into the Pearl River Delta.
The differential in prices is greatest on the western banks of the Pearl River. In Zhongshan, homes can be purchased for about Rmb1,400 (HK$1,655) per square foot, while homes in Zhuhai go for about Rmb4,000 per square foot – substantially below the roughly HK$14,000 per square foot price for apartments in Hong Kong.
At the moment the bulk of Bay Area purchases by Hongkongers have been for investment purposes or holiday homes, and not as primary residences. But with travel times reduced by the new railways and bridges, Xinhua is predicting that more Hong Kong people will choose to commute to work from homes across the border.
Besides the better transport links, the central government has been rolling out policies to encourage Hong Kong people to reside elsewhere in the Greater Bay Area. Hongkongers who choose to live on the mainland can apply for new residence permits this month, for instance. One of the immediate benefits of getting one of these smart ID cards is the ability to buy bullet train tickets online.
© ChinTell Ltd. All rights reserved.
Exclusively sponsored by HSBC.
The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.