China banks on rail boom to fire inland growth

In southwestern Yunnan province, giant concrete pillars bestride the fields, tracing the route of one of scores of new rail lines that China is building, Reuters reported.

In western Xinjiang, construction crews toil on a lonely line crossing the desert wastes to the Silk Road city of Kashgar.
From one end of the country to the other, China is in the midst of a railway boom that promises to transform the world's third-largest economy.

By making it easier to move people and goods, the railway mania will gradually shift the centre of economic gravity inland, accelerating the development of central and western China in an echo of America's experience in the 19th century.

Jing Ulrich, chairman of China equities and commodities at JP Morgan, also sees comparisons with the construction of the US interstate highway system and Japan's Shinkansen high-speed rail network. Both wrought far-reaching socio-economic changes.

"However, due to the immense scale of construction, faster service speeds and China's vast population, the transformative impact may be even more profound," she said in a recent report.

As better transport links encourage manufacturers to relocate away from the coast, demand for property in the interior will grow, lifting consumer sentiment and retail sales. The railways will also be a boon for tourism, Ulrich said.

Taking freight and passenger traffic together, China already has the world's busiest railway. But measured by the size of the country and the needs of its 1.3 billion population, it is puny.

The density of the network, measured by kilometres of line per million inhabitants, is less than a tenth of that of Russia, the United States or Canada, a seventh of the European Union's and about a third of Japan's, according to the World Bank.

Well aware of the problem, the government turned the financial crisis into an opportunity to fast-forward its long-term plan to lengthen the network to 120,000 km by 2020.

Giving the economy a shot in the arm, railway construction created about six million jobs last year, generating demand for 20 million tonnes of steel and 120 million tonnes of cement.

"If the policy is that large cash infusions create jobs, then from a transport perspective railways is certainly the place where the financing is necessary," said John Scales, the lead transport policy specialist for the World Bank in Beijing.

With the Ministry of Railways budgeting a 17 percent increase in spending this year to US$120 billion, they believe the 120,000 km target could be reached as soon as 2015 and see a good chance it will be raised to 150,000 km.

(Source: Cargo News Asia)