$44 Million Loss per Day | High-Speed Rail, the Gray Rhino Impacting China’s Economy | Ghost Rail
Published at : November 03, 2021
As of the end of 2020, China's high-speed rail operating mileage reached 37,900 kilometers, accounting for two-thirds of the world's total mileage, far ahead of other countries.
If you only look at the operating mileage and the speed, you’ll think China's made great achievements for the high-speed rail. But if you look on the other side, China's high-speed rail is also No.1 in terms of debt and operating losses, and has a detrimental impact on China's cargo transportation structure.
On August 31, China Railway released its financial results for the first half of 2021. Data show that in the first half of the year, the company achieved a revenue of 512.8 billion RMB, the net profit is a loss of 50.7 billion RMB, which is equivalent to a daily loss of 280 million RMB, or 44 Million USD. In the first half of last year, due to the impact of the pandemic, the company’s net loss was as high as 95.5 billion RMB.
As of June 30, China Railway’s total liabilities reached 5.8 trillion RMB, its total assets are 8.76 trillion, and the gearing ratio exceeds 66%. The construction of China's high-speed rail relies mainly on bond issuance and bank loans. As reported by China Newsweek in April this year, the pressure of debt repayment for China Railway has arrived.
Most of these bonds have a 5-year maturity term. Since 2021, the peak period of principal and interest repayment has come. At present, the cash flow of railway transportation revenue is not enough to cover operating costs, and China Railway’s daily operations still rely on financial subsidies, no need to even mention repaying debts and interest.
Many local governments have shouldered huge debts because of the high-speed rail construction.
The construction of high-speed rail projects in underdeveloped areas leads to high levels of the local government debt, while the low utilization rate and low operating income of high-speed rail will expose local governments to higher financial risks than China Railway Corporation.
The local government debt caused by the construction of high-speed rail is a black box, mixed with various types of local government liabilities, which have been estimated to be as high as 18.29 trillion RMB. In a previous video, we have talked about how serious local governments’ debts are, and it’s presumed that the construction of high-speed rail is also contributing a lot to the debt.
In addition, along with the construction of high-speed railways, there are the high-speed rail concept cities. These numerous unfinished projects have caused a great waste of farmland and social resources.
The design speed of China's high-speed railway is more than 200 kilometers per hour, and the maximum speed is 350 kilometers per hour. Public information shows that the weighted average unit cost of China's high-speed rail is: 129 million RMB/km for railways with a speed of 350 kilometers per hour; and 87 million RMB/km for speeds of 250 kilometers per hour.
In 2015, the transportation density of the Beijing-Shanghai high-speed rail was about 48 million passenger- kilometers, which was the highest in China's high-speed rails, while the Lanzhou - Xinjiang high-speed rail had the lowest transportation density, only about 2.3 million passenger-kilometers.
In addition, large-scale high-speed rail construction has severely distorted China's transportation structure.
Although the more high-speed railways are built, the more losses there are, Chinese officials have been increasing their efforts to build high-speed railways.
From top to lower levels, Chinese officials all attach importance to the so-called face-saving project.
In addition, the development of China's high-speed rail is also closely related to the Belt and Road initiative.
Now, China’s high-speed rail project not only seems to have failed to help realize its ambitions of global hegemony, it may also become a gray rhino that destroys China’s economy and eventually trigger a huge financial disaster.
#HighSpeedRail#HighSpeedTrain#GhostRail#GhostTown#Debt#Loss#Bond#Trillion
All rights reserved.
If you only look at the operating mileage and the speed, you’ll think China's made great achievements for the high-speed rail. But if you look on the other side, China's high-speed rail is also No.1 in terms of debt and operating losses, and has a detrimental impact on China's cargo transportation structure.
On August 31, China Railway released its financial results for the first half of 2021. Data show that in the first half of the year, the company achieved a revenue of 512.8 billion RMB, the net profit is a loss of 50.7 billion RMB, which is equivalent to a daily loss of 280 million RMB, or 44 Million USD. In the first half of last year, due to the impact of the pandemic, the company’s net loss was as high as 95.5 billion RMB.
As of June 30, China Railway’s total liabilities reached 5.8 trillion RMB, its total assets are 8.76 trillion, and the gearing ratio exceeds 66%. The construction of China's high-speed rail relies mainly on bond issuance and bank loans. As reported by China Newsweek in April this year, the pressure of debt repayment for China Railway has arrived.
Most of these bonds have a 5-year maturity term. Since 2021, the peak period of principal and interest repayment has come. At present, the cash flow of railway transportation revenue is not enough to cover operating costs, and China Railway’s daily operations still rely on financial subsidies, no need to even mention repaying debts and interest.
Many local governments have shouldered huge debts because of the high-speed rail construction.
The construction of high-speed rail projects in underdeveloped areas leads to high levels of the local government debt, while the low utilization rate and low operating income of high-speed rail will expose local governments to higher financial risks than China Railway Corporation.
The local government debt caused by the construction of high-speed rail is a black box, mixed with various types of local government liabilities, which have been estimated to be as high as 18.29 trillion RMB. In a previous video, we have talked about how serious local governments’ debts are, and it’s presumed that the construction of high-speed rail is also contributing a lot to the debt.
In addition, along with the construction of high-speed railways, there are the high-speed rail concept cities. These numerous unfinished projects have caused a great waste of farmland and social resources.
The design speed of China's high-speed railway is more than 200 kilometers per hour, and the maximum speed is 350 kilometers per hour. Public information shows that the weighted average unit cost of China's high-speed rail is: 129 million RMB/km for railways with a speed of 350 kilometers per hour; and 87 million RMB/km for speeds of 250 kilometers per hour.
In 2015, the transportation density of the Beijing-Shanghai high-speed rail was about 48 million passenger- kilometers, which was the highest in China's high-speed rails, while the Lanzhou - Xinjiang high-speed rail had the lowest transportation density, only about 2.3 million passenger-kilometers.
In addition, large-scale high-speed rail construction has severely distorted China's transportation structure.
Although the more high-speed railways are built, the more losses there are, Chinese officials have been increasing their efforts to build high-speed railways.
From top to lower levels, Chinese officials all attach importance to the so-called face-saving project.
In addition, the development of China's high-speed rail is also closely related to the Belt and Road initiative.
Now, China’s high-speed rail project not only seems to have failed to help realize its ambitions of global hegemony, it may also become a gray rhino that destroys China’s economy and eventually trigger a huge financial disaster.
#HighSpeedRail#HighSpeedTrain#GhostRail#GhostTown#Debt#Loss#Bond#Trillion
All rights reserved.
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