Railway System Expansion Should Reflect the New Economy Reality

On June 28, China's State Council approved a plan to expand the country's railway system by building a railroad network covering all of the country's 2,800-plus counties by 2020, as well as adding high-speed railway lines. But in the face of industrial overcapacity, policymakers should be very cautious about massive growth plans for railway projects.

As China's economic slowdown continues, many officials view investments in the railway system – especially spending on high-speed railroad projects – as a significant opportunity to boost domestic consumption. Over the past several years, China's annual fixed-asset investment in the railway system has exceeded 800 billion yuan, or US$ 119 trillion. Surely, there is room for further railway investment in China, especially in intercity lines connecting major cities, but reckless investment decisions may result in idled transportation capacities and huge debt.