Caixin
Nov 17, 2011 12:34 PM

How Tracks Froze from Hangzhou to Changsha

July 1, 2013, is still the official target date for completing a bullet railway line between the willow-shaded city of Hangzhou and historic Changsha.

But central government funding for the 295-kilometer, Zhejiang Province section of the 10 billion yuan project froze in February and began only a partial thaw in November. 

The ministry's provincial rail bureaus and building contractors have struggled to obtain bank financing. Equipment suppliers haven't been paid. And tens of thousands of laborers haven't seen a paycheck since spring. 

Indeed, China's entire bullet train network program has been on shaky ground since public interest in bullet train travel fell off a cliff in July, when a pair of bullet trains collided near Wenzhou, not far from Hangzhou.

Today, cranes stand idle and work crews have vanished from construction sites along the route, part of tracks eventually slated to connect Shanghai with the Yunnan Province capital Kunming. Partially completed tunnels and piers without bridges bespeak a grand infrastructure project in limbo.

Clearly, builders of the Hangzhou-Changsha railway will miss  their original deadline, if they finish at all.

Trickling Funds 

Prospects seemed to improve in late October, when the Ministry of Railways raised a fresh 20 billion yuan by issuing bonds and channeled 3 billion yuan into the project.

420 million yuan was allocated to the Zhejiang section. And a Jiangxi Province source with a project supplier told Caixin the amount earmarked for work in that province was only about 200 million yuan, most of which went toward overdue worker paychecks.

The source said his company paid back 1 million yuan of his nearly 100 million yuan of overdue payments. 

Contractors and the provincial rail bureaus overseeing the project were heartened again in early November by news that the Ministry of Railways would raise another 250 billion yuan through bank loans.

Ministry officials convened a "back-to-work" meeting November 2, where each bureau was ordered to raise 100 million yuan in matching funds within two months.

Yet the amount of money promised this fall pales in comparison to 2010 financing, when the national fast-train buildout was moving at full-throttle speed. For example, the Zhejiang section of the Hangzhou-Changsha line alone received some 10 billion yuan last year.

Convinced that China's central government would guarantee funding for the powerful Ministry of Railways and its bullet-train project, contractors pushed forward at breakneck speed on mere promises of getting paid by the Zhejiang, Jiangxi and Hunan province rail bureaus.

An official at Zhejiang-section contractor China Tiesiju Civil Engineering Group said the rail line's builders and suppliers never doubted "guaranteed funding for key, national projects. Local governments cooperate and everyone attaches importance to them. So they are projects of choice for construction firms."

Drying Rack

But now China Tiesiju, China Railway No. 3 Engineering Group, China Railway No. 11 Engineering Group are among the builders waiting to be paid for work they did many months ago. Similarly, the provincial rail bureaus are behind in payments to raw materials and equipment supplies.

Ministry funds started drying up after Liu Zhijun, the rail minister and chief promoter of nationwide bullet trains, was sacked in February on charges of corruption.

In May, Liu's replacement Sheng Guangfu proposed resuming support for existing projects but an overall scale-back. Meanwhile, the ministry continued to delay scheduled allocations for the project's segments around the country.

The ministry completely stopped funding all Zhejiang fast-train rail projects between February and October. Banks likewise turned down financing applications.

"Loans were increasingly difficult," said one official with the Zhejiang rail bureau. "In the past, banks had been chasing us with loan offers."

The Wenzhou crash, which killed dozens of passengers, tightened credit further. Just days after the tragedy, for example, a Zhejiang branch of a state-owned bank ordered credit officers to investigate lending risks for each rail industry client.

Several project contractors said provincial rail bureaus stopped paying them in August.

Through the summer, some hopeful contractors tapped their own funds to keep projects alive. Ringing in their ears were the words of rail bureau officials who, since March 2010, had urged them to meet accelerated project schedules.

After the funding train derailed, however, building crews and material suppliers were along those left in the lurch. Some workers haven't been paid since April, according to rail bureau officials. And some material suppliers have complained they've been owed money since July.

The big stall is also raising technical risks. For example, engineers have warned about the integrity of elevated tracks on the Zhejiang segment, many of which have been only been partially completed.

For unfinished bridges, one chief engineer told Caixin, "concrete quality will change with time. Suspending or slowing construction affects bridge quality." Similarly, he said, half-done tunnels "bring the risk of collapse."

Today, while bridge piers and tunnel walls weaken, contractors who had been gung-ho for bullet trains are shopping for new clients.

Scrawled on walls that surround construction sites along the Hangzhou-Changsha right-of-way are phone numbers for crane suppliers whose company bosses, when contacted, said they will no longer take jobs on China's high-speed railway.

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