China is now undertaking the world’s biggest railway expansion since the U.S. laid its transcontinental line in the 1860s. Beijing plans to spend $248 billion through 2020 on 75,000 miles of new track, for both freight and high-speed passenger lines. At that point, China’s high-speed passenger network will likely be the biggest on earth.
Despite these colossal ambitions, a nagging question remains: Can anyone make money from all this? Equipment suppliers, such as China South Locomotive & Rolling Stock Corp. and multinationals like Siemens, certainly can. But it’s hard to profit from running a railroad on the mainland. Analysts at UBS (UBS) estimate China’s Ministry of Railways, which operates the railroads, has a net profit margin of less than one percent on revenues of about $35 billion. The Ministry maintains majority control over all rail lines and sets freight rates for farm products and ticket prices for migrant workers at artificially low levels. It wouldn’t comment for this article.
Does China need to be making a profit from its rail lines? Most industrialized countries subsidize their rail systems, I’m not sure why we’re holding ours here in the United States to a different standard. Hopefully the PRC hasn’t drifted so far into capitalism that it doesn’t recognize a valuable public service when it sees one.
And did I mention that the country is getting serious about intraurban rail transit as well? To the tune of 3,000kms (1,800 miles) and 88 billion dollars?