China is planning a major expansion of its high-speed railway network as part of its post-Covid-19 infrastructure investments, potentially eroding demand growth for road and aviation fuel.
State-owned railway operator China State Railway (CR) announced a blueprint this month that would double capacity of the country's high-speed rail lines in the next 15 years. CRC is aiming to almost double the high-speed rail network – defined as speeds of more than 200km/h - to 70,000km by 2035. China existing high-speed rail network, the world's biggest, covers 36,000km.
The targets are an advance on a 2016 railway development plan put together by top economic planning body the NDRC, the transport ministry and CR. This plan targeted 45,000km of high-speed rail lines by 2030, as part of a 59,000km expansion of China's total rail network to 200,000km.
The NDRC's focus is on normal-speed rail, which it sees as benefitting smaller towns as well as larger urban areas. But CR is putting a bigger stress on high-speed rail. It wants to link all cities with at least 500,000 inhabitants to the high-speed network, as well as cities with a population of 200,000 or more to the wider network, in plans that could undercut growth in short-haul air travel as well as demand for diesel-fuelled inter-city buses.
The expansion plans support several government objectives: to maintain infrastructure development, reduce transportation emissions and help China's economy ride out the global recession caused by the coronavirus pandemic.
Beijing sees infrastructure investment as key to supporting China's post-Covid economy. An economic plan released in May called for expanding high-speed railways along rivers and coastal areas, and accelerating planning and construction of the urban rail network. Plans for the "Great Bay Area" linking Guangdong province, Hong Kong and Macao are helping drive spending, with the local government targeting a 4,700km rail network by 2025 and 5,700km in 2035 and a cost of at least Yn474bn.
China is spending more than 800bn/yr ($115bn/yr) to build its rail network. Investment fell by over 20pc in February-March this year, at the peak of the country's coronavirus outbreak, but bounced back to record 1.6pc growth to Yn393bn in January-July, according to the national railway administration (NRA) database. China's total infrastructure investment dropped by 1pc in the first seven months of this year because of Covid-19, figures from the national statistics bureau show.
The expansion has saddled CR with rising long-term debts, which have more than doubled in the past eight years to almost 4.8 trillion yuan ($693bn), according to company figures. Its total liabilities exceed Yn5.5 trillion.
Pollution targets
The government has been looking to shift more freight on to the rail network to reduce pollution. Its three-year Blue Sky action plan to curb particulate pollution, announced in 2018, envisaged a shift from road haulage to rail and waterways, in a move that threatened to cut diesel's share of China's road fuel mix.
The plan focused most strongly on halting movements of coal by road from major ports around Bohai bay, Shandong province, the Yangtze river delta and the ports of Tangshan and Huanghua in Hebei province, and instead forcing freight to move onto the railway system and waterways.
Ports in the region are reporting an increase in rail use, with almost 64pc of iron ore transportation from Tianjin port done by rail in the first half of this year, up from 50pc in 2019 and just 30pc in 2018. But Chinese diesel margins have stayed strong, easily outperforming gasoline last year, suggesting the wider impact of the shift on diesel use has been limited.
The government appears on course to meet its target, set in mid-2018, to increase rail freight to 4.8bn t/yr by this year, up by 30pc from 2017. Rail volumes were 4.39bn t last year, up by 7.2pc or 360mn t from 2018, according to the NRA.
