Hong Kong's Latest White Elephant

The Hong Kong government likes to believe that it is in tune with an economy driven by economic liberalism and focus on return on capital. In reality it has become the tool of two types of vested interest.

One is the clutch of property development groups who buy the loyalty of civil servants through post-early retirement jobs and other perks. Maximizing the tycoons' return on capital takes precedence over the interest of the public and its revenue which government is supposed to represent. On the political side there is Beijing, leaning on a spineless chief executive, Donald Tsang, to speed up integration with the mainland and focus on capital spending regardless of rate of return.

Never were these twin tendencies better illustrated than by the government's pushing through a legislature dominated by business interests elected by small circles of voters of a project to spend more than HK$60 billion on a 26-km high-speed railway connecting Hong Kong to a line being built to link Guangdong to the border town of Shenzhen. It is not even very high-speed. Its design speed is 200 kph compared with the standard 350kph for China's high-speed trunk routes.

The prospect has aroused intense opposition from youthful protesters and from villagers who would be displaced by the line. The most telling arguments against the project are financial. The government has made barely any effort to justify the spending either in commercial or environmental terms for the very good reason that it is impossible. Instead the project is being hurried through on the basis of unsupported claims that Hong Kong would be marginalized if left out of China's high speed network.

The cost per kilometer would make this the world's most expensive railway, all to cover a distance which currently takes 20 minutes by car and roughly the same by the existing slow-speed railway.

The cost is exceptionally high largely because it is planned to take the line right into the middle of Kowloon, one of the world's most densely populated areas, tunneling both through reclaimed land and under high-rise buildings. Suggestions that the terminus be located in the New Territories, closer to the border and where construction costs would be far lower, have been dismissed. Why? Because the property giants which control so much of downtown Kowloon want it there. And they have Donald Tsang and his clutch of bureaucrats in their pocket. The same groups are also deeply involved in the construction industry, like their counterparts in Japan who influenced the long-ruling LDP into government funding of endless roads and bridges to nowhere but which generated handsome profits for the construction industry.

From Beijing's political viewpoint, the high-speed rail has significance for three reasons. First it is needed to show that Hong Kong really is part of China and follows Beijing's lead rather than deciding for itself how best to spend it resources. Second, it reflects Beijing's belief that all infrastructure building is a good thing, and should take precedence in government spending over the likes of health care, cleaning up the environment, or ensuring decent living conditions for the old and disadvantaged. Third, it must go ahead because many people object. Tsang must show that he is as arrogant as the central government and will not listen to rational arguments, let alone to student and peasant dissidents.

Studies in other countries have clearly shown that high-speed rail is nowhere profitable. And it is only a time-saver compared with air for journeys of up to about 1,000 km. Of China's major cities to be connected by the high-speed network, only Guangzhou, Changsha and Wuhan fit this definition. But as Guangzhou's new high-speed terminal will be on the outskirts of the city, it would be at least as quick to take the old train from Hong Kong which goes to the mid-city station. Wuhan at almost 1,150 kilometers is at the outer end of the range where train is quicker. There is very limited traffic from Hong Kong to Changsha. Beijing will be reachable on the network in about two years, but the journey time from Hong Kong would still be about six hours, so slower and more costly than by air.

Almost everywhere that high speed trains exist they are (despite operating subsidies) more expensive than air and much more so than bus. There may be some low emission benefits, but the faster the train goes the fewer they are. Indeed, though trains can go at up to 500 kph, the energy cost is prohibitive because wind resistance increases at twice the speed increase. China may boast 500kph-capable trains but they are impractical.

The 300-kph average requires ticket prices, even heavily subsidized, which are beyond the affordability of most Chinese. Even in rich countries like Japan and France with geography and population density ideal for high-speed trains, and where average speeds are closer to 250 kph, they remain a luxury.

Likewise train journeys through the Channel Tunnel from London to Paris – 500 km and 2 hours 15 min., are more expensive than air and much more than bus. People should have to pay a lot for the city center-to-city center convenience as well as the time savings.

China's investment in railways generally is doubtless a good idea. But the high operating cost of the high-speed ones, and their lack of environmental benefits – especially in a country which mainly burns coal to generate power – make them a dubious investment in prestige.

Anyway, what suits China may not suit Hong Kong. There may be some sense in a line from Beijing to Guangzhou because it passes through several big cities which are 500-800 km apart – Changsha, Wuhan, Zhengzhou, Shijiazhuang. Likewise for the Beijing to Shanghai line via Xuzhou, Nanjing, Wuxi etc and north from Beijing to the Manchurian cities. But China is not extending the high-speed network outside the north-south corridors.

In short, Hong Kong is being railroaded into a massively expensive project – even assuming it is completed on time and within its HK$66.9 billion budget – with scant discussion either of its economic rationale or the alternatives for covering those 26km to the border.