Chinese media has revealed that in recent years, the rapid expansion of high-speed, long-distance rail lines in China has led to high idle capacity, resulting in an increasing number of expensive station shutdowns. The report questioned who should be held responsible for the significant and ineffective investment.
China Business Journal reported on May 21 that at least 26 high-speed rail stations in China are barely being used because of their remote locations and insufficient surrounding facilities.
The report states that some cities have invested heavily in the construction of high-speed rail lines and stations but that many stations have stopped operating or were never put into use. It cited Hainan Danzhou Haitou High-Speed Railway Station as an example. The local government in Hainan Province invested more than 40 million yuan ($5.52 million) in the construction of the station in the 2010s.
In July 2023, the station attracted attention, as it had not been used for more than seven years after construction was completed. The local authorities claimed that it was because the daily passenger flow was less than 100 people and that if the station were put into operation, the railway department would suffer huge losses.
The report lists 26 high-speed rail “ghost stations” across China, including Wanning Hele Station of the Hainan Island Ring High-Speed Railway, Shenyang West Station of the Beijing-Harbin High-Speed Railway, and Dandongxi Station and Guangningsi Station of the Dandong-Dalian Express Railway—all of which were completed but are not in operation.
Jiulangshan Station in Zhuzhou City, Yizhuang Station of the Beijing-Tianjin Intercity High-Speed Railway, Shenyang West Station, Zijin Shandong Station, and Jiangpu Station in Nanjing City were briefly in operation but have been closed because of low passenger flow.
Observers have pointed out that China’s mass construction of the high-speed rail network is an example of the ruling Chinese Communist Party’s (CCP’s) blind development of infrastructure and production overcapacity. The projects received investment from both the central and local governments who engaged in mega borrowing that has contributed to China falling deeper and deeper into its debt crisis.
Frank Xie, a professor at the Aiken School of Business at the University of South Carolina, told The Epoch Times on May 23 that for China’s railway investments, “It is all government investment, but the CCP didn’t do any real feasibility studies, such as passenger flow, people’s income, and public’s needs.
“Because the construction of the high-speed rail is good for the GDP and the local governments’ political performance, they don’t care about the waste of the state funds. So many lines of China’s high-speed rail have the same problem of high idle capacity. They can’t even pay the electricity bill, let alone the investment loans.
High-Speed Rail Debt Crisis
As early as 2019, the serious debt problem behind China’s rapidly developing high-speed rail had already attracted much attention.Major Chinese financial news outlet Caixin reported that China has the world’s largest high-speed rail network but also ranks first in high-speed rail debt and operating losses. The article predicted that the enormous debt of China’s high-speed rail “may lead to serious inflation and create huge financial risks.”
According to public data, in the first half of 2022, the state-owned China Railway Group’s debt had exceeded 6 trillion yuan ($828.5 billion).
In May, officials claimed that China Railway Group “turned losses into profits” in 2023. However, according to public data, as of the end of 2023, China Railway Group’s debt-asset ratio was 65.54 percent, and its debt was still as high as 6.13 trillion yuan ($846.5 billion).
“Over the past 40 years, China’s development has relied on exports to Europe and the United States, so it needed to build a large number of various infrastructure for transporting products,” Chinese American economist Davy J. Wong told The Epoch Times. “However, these investments have increased to an extent that has exceeded the actual needs. Especially in the past decade or so, the overall economic situation has lost the momentum of rapid growth. It has become driven by increasing capital injection and lending, and has fallen into a cycle of diminishing investment returns.”
Mr. Wong pointed out that the CCP continues to use large-scale infrastructure construction to stimulate the economy, but building high-speed rail projects that exceed real needs is leading to a rapid increase in debt. He said the high-speed railways that were intensively constructed more than 10 years ago have entered the peak period of maintenance, which requires a large amount of funds and has increased the overall debt level.
“Many high-speed rail lines are losing money and cannot repay their debts at all. Adding to the existing local government debts, real estate debts, and debt problems of small and medium-sized finance firms, the risk of an economic hard landing continues to increase,” he said.
Mr. Xie said China currently has large-scale industrial overcapacity and that high-speed railways with high idle capacity are a form of overcapacity.
“It is caused by excessive infrastructure construction without market demand or consumption base, but the network and stations still need to be maintained,” he said. “It is now deep in a debt crisis, and the central and local governments’ debts are all part of it.”
