Caixin
Sep 10, 2012 06:20 PM

Sound Financials Recharge China's Fast Trains

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(Beijing) – Four of the nation's 14 high-speed rail lines have financially broken even since bullet trains started full-speed, intercity service in China two years ago, giving impetus to a Ministry of Railways expansion.

Passenger ticket revenues have so far matched expenses – including debt payments – for the busy Beijing-Tianjin, Shanghai-Nanjing, Beijing-Shanghai and Shanghai-Hangzhou lines, a source at the National Development and Reform Commission (NDRC) told Caixin.

Moreover, the financial health of the Beijing-Shanghai line exceeded expectations during its first operating year, which ended in June, sources told Caixin.

The ministry has declined to release financial data but said trains whisked 52.6 million passengers between the two cities during the 12-month period. Ticket sales on the line brought in 1.86 billion yuan in July 2011, Caixin learned from other sources, and about 7 billion yuan between June 2011 and January.

This and other noteworthy financial data reflects the popularity of fast-rail tripping in relatively wealthy eastern China, where some people now choose bullet trains over airliners and business travelers abound.

Passenger cars on bullet trains in other parts of the country, such those traveling the Zhengzhou-Xi'an line, are emptier and apparently underperforming financially. Some may be losing significant sums of money.

Only about a dozen trains a day travel the Zhengzhou-Xi'an high-speed railway, for example, compared to 65 fast trains a day running between Beijing and Shanghai. A lighter schedule on a given line means less revenue for servicing debt.

But the rail system overall seems to be recovering from a July 23, 2011, collision of two bullet trains near Wenzhou that killed 40, and its disgrace over the ouster of Liu Zhijun as railways minister – and godfather of the fast-rail building boom – earlier that year on corruption charges.

Those incidents, coupled with close government and public scrutiny of the Liu administration's huge, debt-fueled investment in new construction, last year preceded a significant slowdown for construction and new projects by the rail ministry, which builds and operates China's sprawling railroad network.

Healthy Signs

A ministry subsidiary operating as the builder-owner of the

Beijing-Shanghai railroad system – the Beijing-Shanghai High-Speed Railway Co. Ltd. – lost 800 million yuan during the first three months of bullet train runs before its financial picture improved, a source said. The loss was based on 3.5 billion yuan in revenues against 4.3 billion yuan in expenditures.

The company borrowed from banks for about half of the nearly 221 billion yuan spent to build the railroad. Lenders agreed to charge no interest for the first five years of each 20-year loan, a source said, saving the company about 5 billion yuan.

Following an operations model crafted for high-speed lines nationwide, the builder-owner is working with Beijing, Tianjin and Shanghai regional railway bureaus, which function under the rail ministry, to provide operating staff, scheduling and other services. Equipment including trains are owned by regional railway bureaus.

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