In a recent article published by Chinese state media, it was pointed out that in recent years, the massive construction of high-speed railways has led to the addition of a large number of high-speed railway stations. However, at least 26 high-speed railway stations are currently unused, raising questions about accountability for the ineffective investment, with criticism mainly directed at local governments. Experts analyzed that the high-speed railway network is a manifestation of the Chinese Communist Party’s blind infrastructure development frenzy, which was jointly invested in by the central and local governments. It was mainly a haphazardly planned project where decisions were made without thorough considerations, leading to overcapacity and a looming debt crisis.
On another note, the Xiongan New Area, a prestige project associated with Chinese leader Xi Jinping, had high hopes for its high-speed railway station to become a future transportation hub. However, currently, there are very few passengers, and its construction is deemed purely for political considerations.
According to a report by “China Business News” on May 21, at least 26 high-speed railway stations in China have been built but remain unused or shut down due to remote locations, insufficient surrounding facilities, and low passenger traffic.
For instance, the Haikou Dantuotou High-Speed Railway Station in Hainan Province had an investment exceeding 40 million yuan. It sparked controversy last year when, despite being completed for over 7 years, it remained unused due to daily passenger traffic of less than a hundred people. Following public pressure, the station finally started operations on December 15, 2023.
Other high-speed railway stations like Wanning City and Helve Station of the Hainan Island Ring High-Speed Railway, Shenyang West Station of the Jingha High-Speed Railway, Dandong West and Guangningsi Station of the Danda Express Railway, among others, are in a state of completion but are not operational. Stations like Jiulangshan Station in Zhuzhou City, Yiwuzhuang Station in Beijing Economic-Technological Development Area, Shenyang West Station, Zijinshan East Station in Nanjing, and Jiangpu Station opened briefly but were closed due to low passenger flow.
Some cities invested heavily in building high-speed railway stations, but most of them are not operational. For example, Guilin built 9 high-speed railway stations, and the Wutong Station faced issues like remote location and inadequate transportation facilities, with a daily average passenger flow of less than 200, leading to the cessation of passenger operations after just 4 years.
Questions arise about how these costly high-speed railway stations ended up unused, from design, planning, investment, construction to eventual abandonment. It remains unclear the roles played by the design entities, high-speed railway operators, and local governments in this process, and who should be held accountable for these ineffective investments.
An individual involved in high-speed railway project design at China Railway Second Survey and Design Institute mentioned that some local governments, to reduce urban demolition pressure and promote land development in new areas, prefer high-speed railway stations in the suburbs.
Local government officials noted that during the initial stage of high-speed railway construction, the railway department had a relatively dominant say in route selection and station setup discussions, with the former Ministry of Railways mainly funding the projects. However, in recent years, with an increasing proportion of local investments in high-speed railway construction, the authority of local governments strengthened. The enthusiasm of local governments in investing and constructing high-speed railway stations is high, linking station construction to their political achievements. This resulted in more projects planned and initiated in recent years, surpassing the initial “four vertical and four horizontal” high-speed railway projects.
Furthermore, a representative from China State Railway Group Co., Ltd. mentioned that the railway department heavily relies on local governments for land acquisition and related aspects. Some local governments proposed to fund station setup and connecting lines, to which the railway department generally did not strongly object. However, after the lines are operational, if the stations face insufficient transportation facilities or low passenger traffic, the railway department would reduce train stops or temporarily halt passenger services.
Professor Xie Tian from the Darla Moore School of Business at the University of South Carolina expressed concerns on May 23 regarding railway investments in China. He emphasized that railway investments are a joint effort of both the central and local governments and are entirely government-funded without conducting proper feasibility studies on factors like passenger traffic, income levels, and public demand.
“When it was designed, it did not really consider market demands. It was basically a haphazard project driven by the Chinese Communist Party’s eagerness to boost GDP and showcase political achievements. It was waste for the sake of waste. Many high-speed railway lines in China face these issues, where they cannot even afford electricity bills, let alone repay the loans invested.”
Xie Tian highlighted that China’s high-speed railway network is a representation of the Communist Party’s infrastructure frenzy, characterized by blind expansion and development.
“To create an illusion of rapid economic growth for China. The infrastructure frenzy is to boost GDP, deceive the international investment community, and carry out grand construction plans. Now, they realize that there is no demand, especially after the economic downturn, the public cannot even afford high-speed rail travel.”
David Huang, a Chinese-American economist, mentioned on May 20 that the issue of haphazard investments in high-speed railways makes it challenging to differentiate accountability between the central government, local governments, and relevant departments. Based on economic principles, when investments exceed a certain threshold, further investments only lead to decreased profits or even losses.
“Over the past 40 years of development in China, due to the export of products to Europe and the United States, various transportation tools required massive construction. However, these investments have reached a point where they surpass actual needs. Especially in the past decade, with the absence of rapid economic growth, the economy has relied on increasing money supply and loans, falling into a cycle of diminishing investment returns.”
In June 2019, the responsibility for high-speed railway construction and operation under China Railway Corporation was restructured into China State Railway Group Co., Ltd., a centrally managed state-owned sole proprietorship company. Despite the continued rapid development of China’s high-speed railways, the debt issue behind the scenes has attracted significant attention.
According to official data from the China State Railway Group, in 2023, the national railways completed fixed asset investments of 764.5 billion yuan, a 7.5% increase from the previous year, with 2,776 kilometers being high-speed tracks out of the total 3,637 kilometers. In the first quarter of 2024, national railways completed fixed asset investments of 124.8 billion yuan, a 9.9% year-on-year increase. This accelerated investment in the first quarter hints at a potential overall investment surpassing that of 2023.
However, by the first half of 2022, China State Railway Group’s debt had exceeded 6 trillion yuan.
In May 2024, official reports claimed that China State Railway Group turned a profit in 2023. Nevertheless, by the end of 2023, the asset-liability ratio of the China State Railway Group remained high at 65.54%.
Professor Zhao Jian from Beijing Jiaotong University’s School of Economics and Management previously warned on Caixin that while people often see China’s high-speed railway operation as the world’s largest in terms of mileage and speed, they tend to overlook the flip side – the world’s largest debt and operational losses of high-speed railways. Zhao predicted that with the financial status of high-speed railways, they would eventually become a “gray rhino” in China’s financial system, indicating huge financial risks.
A gray rhino is often described as a high-probability, high-impact crisis that is often ignored.
David Huang explained that China’s economic growth was initially fueled by massive infrastructure projects, leading to a false sense of prosperity. However, with the introduction of high-speed railway projects, people became engrossed in the so-called “Chinese speed” and “Made in China” self-satisfaction. Nevertheless, constructing high-speed railway projects beyond actual requirements has escalated debts rapidly. The maintenance phase of high-speed railways built over a decade ago has now arrived, requiring substantial maintenance funds and further increasing the debt level.
“Many high-speed rail routes are running at a loss and are unable to repay debts. Coupled with existing local debts, real estate debts, and debts in small and medium-sized financial institutions, the risk of experiencing an economic hard landing continues to rise.”
Xie Tian suggested that China is currently facing massive overcapacity, and high-speed railways represent surplus production capacity. “It is an infrastructure surplus lacking market demand and consumer base. Yet, the network and stations still need maintenance. The debt crisis China is now facing involves debts of both the central and local governments.”
“High-speed railways epitomize China’s blind, wasteful, and excessively expansive infrastructure projects or a symbol thereof,” he added.
Some netizens sarcastically referred to the Xiongan New Area high-speed railway station, widely publicized as the “largest high-speed railway station in Asia” but left unused. The chaotic investments and constructions are seen as top-down decisions and not limited to the high-speed railway sector. A comparison was drawn to other abandoned projects nationwide, stating “Let’s see the millennium high-speed railway station” and “compared to the nationwide unfinished projects, it’s nothing much.”
Established on April 1, 2017, the Xiongan New Area was a national key construction project promoted by Xi Jinping. Its official launch was touted as a “millennium project of national importance.” However, Xiongan New Area has long been viewed unfavorably due to its inland location lacking economic foundations and developmental attractiveness. Furthermore, being adjacent to the low-lying North China Plain near Baiyangdian, Xiongan is prone to flooding.
In recent years, the construction progress in Xiongan New Area has been sporadic, with reports of many unfinished projects. Notably, the purportedly largest in Asia Xiongan High-speed Railway Station had weeds growing around it in January 2023 as seen in a video.
From May 10-12, 2023, Xi Jinping visited Xiongan New Area, claiming his decision about the area was “completely correct” and emphasized the need to remain calm and focused. He held a meeting in Hebei, urging central enterprises and their subsidiaries in Beijing to expedite moves, warning that they should relocate if necessary.
However, about a month after Xi Jinping’s visit, the Hong Kong-based “Sing Tao Daily” reported on June 6, 2023, that the Xiongan High-Speed Railway Station, with an investment of over 30 billion yuan, operating for more than two years, had not completed formal acceptance due to the lack of funding for delivery.
David Huang stated that the issues surrounding the high-speed railway station in Xiongan New Area are different from the earlier mentioned railway station chaos. The Xiongan New Area was entirely politically motivated, aiming to establish a second capital city by relocating Beijing’s administrative center. However, the challenge arose when the central government required Beijing’s institutions and enterprises to move, making individual enterprises bear the relocation cost. Unwilling to spend excessively on fulfilling political duties, enterprises did not contribute to Xiongan New Area’s high-speed railway station usage.
Huang emphasized that these challenges stem from the political needs conflicting with economic development and individual interests, leading to a contradiction.