Following the increase in water, electricity, and gas prices in mainland China, high-speed rail has also announced a price hike. Four popular high-speed rail routes have announced nearly a 20% increase in prices in mid-June, with business class ticket prices rising by almost 40%. This news has quickly become a hot topic. Analysts believe that the recurring price hikes not only reflect tight finances at the local government level but also suggest an attempt by the Chinese Communist Party to create “artificial inflation” to combat deflation.
Recently, China Railway’s official website announced that starting from June 15th, ticket prices for the Wuhan-Guangzhou high-speed rail, Shanghai-Hangzhou, Shanghai-Kunming, and Hangzhou-Ningbo routes will be adjusted, affecting a large number of passengers traveling from Shanghai to various destinations in Zhejiang.
The price of first and second-class seats will increase by around 20%. The most significant increase is seen in business class seats, with a 39.41% hike in prices from Shanghai Hongqiao to Hangzhou East, marking one of the largest price increases on China’s high-speed rail lines in recent years.
Upon the release of the announcement, it sparked discussions among the public, trending on various social media platforms. Netizens expressed their concerns, with many lamenting the fact that prices for everything are rising while their wages remain stagnant. The public views the price hikes as increasing the cost of travel for the general population, and believe that high-speed rail ticket prices should consider more public interest rather than solely being based on market and financial pressures.
On May 8th, an article from the self-media platform “Financial Horizon” pointed out that the price hike announcement by the high-speed rail was made without holding any public hearings, sparking deep skepticism among ordinary citizens.
The significant increase in high-speed rail prices will disproportionately affect the large labor force from Hubei and Hunan provinces. Many people from these provinces travel for work to regions like the Pearl River Delta in the south or the Yangtze River Delta in the north. This sudden increase in travel costs will be a heavy burden for workers with monthly salaries of only a few thousand yuan. The substantial hike in high-speed rail ticket prices for return trips home will significantly impact many people’s wallets.
On May 9th, Qian Jian, a prominent finance and economics expert and the founder of the certified Six Emperors Brand Planning Co., Ltd. in Shenzhen, pointed out that the news of a 20% price hike for four popular high-speed rail routes is putting pressure on folks who work in Guangdong and Zhejiang. After the price hike, train tickets are now more expensive than plane tickets!
Qian Jian emphasized that high-speed rail is an essential part of people’s daily lives. The hike in ticket prices, especially for second-class seats, may prevent ordinary folks from affording high-speed rail travel. If people are unable to travel, go on business trips, or work in different locations, how will consumption and business prosper? Previously, the low ticket prices were supported by government subsidies, but “government revenue is also supported by our ordinary citizens!”
According to reports from mainland Chinese media, only six high-speed rail lines, including Beijing-Shanghai, Shanghai-Nanjing, Nanjing-Hangzhou, Guangzhou-Shenzhen-Hong Kong, Shanghai-Hangzhou, and Beijing-Tianjin routes, are profitable. Among these, the Beijing-Shanghai high-speed rail is the only long-distance profitable route among the six.
These rare profitable high-speed rail lines are located in economically developed regions with abundant and high-quality passenger flow resources.
Qian Jian pointed out that the state-owned railway group operating the high-speed rail has been incurring losses for years, accumulating debts of 6.13 trillion yuan. Previously, the low high-speed rail ticket prices were sustained by government subsidies. Now, with the government facing financial constraints and drastic reductions in subsidies – from 360 billion yuan in 2022 to just over 6 billion yuan last year, a reduction of 354 billion yuan – price hikes have become inevitable.
Since last year, prices of water, electricity, and gas in various regions of mainland China have been on the rise. Guangzhou announced a water price adjustment plan with a price increase close to 34%, marking the second significant increase in water prices in a first-tier city after Shanghai raised water prices for the first time in a decade at the end of last year, with the highest-tiered prices surging by over 50%. Before that, cities like Xi’an in Shaanxi, Wuhu in Anhui, Nanchong in Jiangsu, and Qujing in Yunnan had already increased water prices by varying degrees, from 10% to 50%.
In April of this year, residents in Chongqing complained about a sharp increase in gas bills due to faster gas meter readings, which led to concerns about gas price hikes. It was later confirmed by the Chongqing government that the situation reported by the public was mostly true. This sparked public attention to gas price hikes, with people realizing that in the past six months, 125 cities and counties in Guangdong, Sichuan, Jiangsu, Hubei, Anhui, and other places had issued gas price increase plans.
As the peak summer electricity consumption period approaches, Guangdong, Hunan, Anhui, Jiangsu, and other provinces have successively announced electricity price adjustment plans, implementing new rounds of transmission and distribution electricity prices with the highest increase reaching 30%.
The wave of price hikes in public services, including water, electricity, gas, and high-speed rail tickets, is sweeping in, gradually pushing the essential costs of people’s daily lives towards an era of inflation, sparking attention and discussions.
Market reports suggest that public service fees for water, electricity, and gas in Chinese cities are still relatively low and could potentially triple.
An article from the WeChat public account “Vision Intellectual Property Research Institute” stated that as local governments are running out of money, the era of widespread price hikes in water, electricity, gas, and other essential services has arrived. Since April of this year, the recurring price hikes have increased the financial burden on the Chinese populace.
The market is particularly concerned about the motives behind the price increases in water, electricity, gas, and high-speed rail tickets, as well as their potential effects on inflation from the perspective of the Chinese government.
An article from “Financial Horizon” points out that the current wave of high-speed rail price hikes shows signs of a hidden agenda. The driving force behind these price hikes is not merely a decision by the high-speed rail operators but a movement originated from higher authorities aiming at artificial inflation. It is anticipated that more public products and services may join the league of price hikes in the future.
Since last year, China’s Consumer Price Index (CPI) has been persistently low, indicating insufficient consumption. This trend signifies that residents are reluctant to spend money.
Following the lifting of epidemic restrictions, the continuous alarm bells ringing for deflation in mainland China have attracted significant attention. Financial experts believe that deflation could lead China’s economy into a sustained vicious cycle.
With water, electricity, gas, and high-speed rail ticket prices all on the rise, various analyses are being conducted on whether this trend will drive inflation.
An article from the “Hong Kong Economic Journal” on May 9th titled “Rise in Necessities: Welcome Inflation?” suggests that the comprehensive price hikes in water, electricity, gas, and fundamental living expenses in China imply a policy intention to guide expectations. Recently, the Central Bank of the Chinese Communist Party has successively introduced measures such as lowering interest rates and guiding long-term bond interest rates downwards, while some banks have canceled large deposits exceeding three years to encourage people to spend rather than save. Now, with the surge in prices of water, electricity, gas, and railway travel, essential living expenses are increasing to boost rigid expenditure, driving CPI and PPI.
In March, the year-on-year increase in CPI was only 0.1%, lower than expected, highlighting the prolonged slump in the real estate market and persistent weak consumption, reigniting concerns of deflation.
The article by the “Vision Intellectual Property Research Institute” mentions that the core reasons for the rise in necessities stem from financial constraints (passive) and the drive to escape deflation (active).
During the Chinese Communist Party’s Two Sessions this year, a target CPI of 3% was set, known as moderate inflation, to prevent the economy from falling into a deflationary inertia.
Despite official encouragements for increased consumption and shopping, people are saying they have “no money to spend.” Therefore, the Chinese government is pushing for higher spending on basic living expenses to stimulate the entire economic society’s return to moderate inflation. However, whether this goal can be achieved or not is left unsaid, as the “Vision Intellectual Property Research Institute” article concludes, “In any case, in the current economic environment, the trend of rising prices in public services has become inevitable.”