China's Railway Dreams Dashed As Top Official Removed

China's dream of building a futuristic high-speed rail network, to be marveled at by the rest of the world, is coming to a swift end. Years of runaway spending, corruption and debt, underlined by persistent concerns over safety, have shaken a once-proud industry and national symbol.

Graft has caught up to China's former head of railways, Liu Zhijun. Liu was expelled from the Communist Party on Monday for corruption and his allegedly ill-gotten assets and bribes have been confiscated. The incident is not unexpected; he had been dismissed from his position as minister of railways in February 2011. His fall is a blow to China's massive government-operated, funded, and built rail networks.

The government's Central Commission for Discipline Inspection (an internal oversight and investigatory organization) announced on Monday that Liu had used his position and power to carry out large illegal dealings. The government claims his actions led to great economic losses and negative social influence. Some regional non-official news sites report that Liu and an associate may have skimmed off commission fees of around 822 million yuan, or nearly $130 million, in their dealings.

Nine other high-placed officials in the Railways Ministry have been investigated since Liu left his position. These include the former chiefs and deputy-chiefs of the railway's central departments, regional bureaus, and engineering and transport companies.

Before his fall from power, the minister presided over an astonishing period of railway construction in China, serving from 2003 to 2011, when the country focused on broadly expanding and upgrading its rail infrastructure.

For a time, Liu was a shining figure under the national spotlight. During his tenure, the ministry imported foreign technologies for domestic use, built a high-speed rail system based on technologies similar to Japan's Shinkansen bullet trains and Europe's TGVs, and launched a nationwide and international campaign to publicize the sophistication of Chinese railways. Beijing dubbed its HSR network 'Hexie Hao' or 'Harmony', alluding to its own efforts to build a harmonious society amid fast-paced economic development. The efforts were seen by domestic and international experts as an attempt to champion the state-led model and to build a prestige project that would make China the envy of the world.

In 2006, the country opened a technologically advanced railway line that linked Tibet to the rest of the country, a major feat of engineering which had to overcome the harsh conditions of the Tibetan Plateau. There were even discussions about whether Chinese engineers would be building California's newly proposed multi-billion dollar HSR network. Stories appeared in Chinese and Western media suggesting the country might even pursue an HSR line across the Eurasian continent to link London to Beijing.

But in 2011, it all came to an ugly end. In late February Liu was dismissed and put under investigation for corruption. In May, the government began slowing train speeds on HSR networks out of concerns for safety. In early July, Japan's Kawasaki Heavy Industries Ltd. (Tokyo: 7012) claimed that Chinese HSR had illegally copied Japanese bullet train technology. Two weeks later, on July 23, a major HSR train crash near the city of Wenzhou, which killed 40 and seriously injured nearly 200, elicited anger at the government from around the country and generated criticism from around the world. The plan for symbolically linking rail development to the country's general economic and social progress was backfiring.

Responsibility for the 7-23 Incident, as the event is now popularity referred to in China, was later pinned on Liu.

The government reduced HSR speeds around the country after the crash, though it claimed the original accident was caused by an error in electrical signals, not overly high speeds.

China is still stubbornly pushing ahead with railway construction. The country is expected to have 120,000 kilometers (75,000 miles) of total railway track in place by 2015. Originally, more than 25,000 kilometers were expected to be HSR by the end of 2015. By the end of 2011, approximately 10,000 kilometers of track around the country lacked sufficient funds for construction to continue. The government later raised more money for these projects, but slowdowns continued, especially in expensive HSR construction. Caixin, a Chinese economic publication, reported that only 16,000 kilometers of high-speed track will be built by 2015. Still, China has the longest track length for HSR in the world, and may ultimately have as much as the rest of the world combined.

The country's overall rail investment in 2009 had already reached 700 billion yuan, or more than $110 billion. That showed more than a 70-fold increase in official spending on railways from only half a decade earlier. In 2008, the State Council approved a plan to spend 2 trillion yuan, or around $300 billion, on railways of all types until 2020.

Now, burdened by heavy debts, the government is moving to open up rail investment in the country to private investment, an uncertain and tricky sell as it still controls ticket pricing and schedules, running heavy losses in areas with lower ridership, especially in western regions.

Zhao Jian, a professor at Beijing Jiaotong University, told People's Daily on Monday that the country's rail network faced a serious task of reorganization beyond simply seeking more capital. The recent opening to private investment was only a gesture and indication of the government's general attitude to seeking private funding; Zhao says the move will not alleviate current problems in the industry. Public railways should be reorganized into three large regional companies, which can then be publicly listed, said Zhao. That would be similar to the process that Japan underwent in the 1980s, when its own state-owned railways also faced massive debts.

High-speed rail in China is competitive with air travel in time and price. A trip from Beijing to Shanghai can take as little as five hours. Linked to major public transportation networks in large cities, fast trains are also a convenient way to avoid the country's clogged airports. But for most average citizens, the high ticket prices make it more of a one-time novelty and not a regular undertaking.