China banks on rail boom to fire inland growth

By: | at 08:00 PM | Intermodal  

In southwestern Yunnan province, giant concrete pillars bestride the fields, tracing the route of one of scores of new rail lines that China is building.

In western Xinjiang, construction crews toil on a lonely line crossing the desert wastes to the Silk Road city of Kashgar.

From one end of the country to the other, China is in the midst of a railway boom that promises to transform the world’s third-largest economy.

By making it easier to move people and goods, the railway mania will gradually shift the centre of economic gravity inland, accelerating the development of central and western China in an echo of America’s experience in the 19th century.

Jing Ulrich, chairman of China equities and commodities at J.P. Morgan, also sees comparisons with the construction of the U.S. interstate highway system and Japan’s Shinkansen high-speed rail network. Both wrought far-reaching socio-economic changes.

“However, due to the immense scale of construction, faster service speeds and China’s vast population, the transformative impact may be even more profound,” she said in a recent report.

As better transport links encourage manufacturers to relocate away from the coast, demand for property in the interior will grow, lifting consumer sentiment and retail sales. The railways will also be a boon for tourism, Ulrich said.

Big Budget

Taking freight and passenger traffic together, China already has the world’s busiest railway. But measured by the size of the country and the needs of its 1.3 billion population, it is puny.

The density of the network, measured by kilometres of line per million inhabitants, is less than a tenth of that of Russia, the United States or Canada, a seventh of the European Union’s and about a third of Japan’s, according to the World Bank.

This sparse network, totalling 86,000 km at the end of 2009, is so overburdened that it carries a quarter of the world’s railway traffic on about 6 percent of the world’s lines.

It is no wonder that China suffers periodic energy shortages because coal trains are delayed in reaching power stations as they are shunted into sidings to make way for passenger trains.

Well aware of the problem, the government turned the financial crisis into an opportunity to fast-forward its long-term plan to lengthen the network to 120,000 km by 2020.

Giving the economy a shot in the arm, railway construction created about six million jobs last year, generating demand for 20 million tonnes of steel and 120 million tonnes of cement.

“If the policy is that large cash infusions create jobs, then from a transport perspective railways is certainly the place where the financing is necessary,” said John Scales, the lead transport policy specialist for the World Bank in Beijing. (Reuters)


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