High-speed Rail Debt Crisis in China Deepens, Leading to Closure of More Stations
According to experts, China’s debt-fueled massive high-speed rail construction is considered another example of overcapacity.
Chinese media disclosed that the rapid expansion of high-speed long-distance rail lines in China has resulted in high idle capacity, leading to a growing number of costly shutdown stations. The accountability for such ineffective investments is being questioned.
China Business Journal reported on May 21 that at least 26 high-speed rail stations across China remain unused due to reasons like remote locations, inadequate surrounding facilities, and low passenger traffic.
The report highlighted the case of Hainan Danzhou Haitou High-speed Railway Station, where the local government invested over 40 million yuan ($5.61 million) in the station’s construction during the 2010s. However, the station remained closed for over 7 years after completion due to minimal daily passenger flow, leading to potential massive losses if operational.
Observations point out that the mass construction of high-speed rail networks reflects the Chinese Communist Party’s blind pursuit of infrastructure development and production overcapacity. This has been mainly funded by government borrowing, plunging the country into a deepening debt crisis.
Experts warn that the excessive construction of high-speed rail projects that surpass actual needs is escalating debt levels, posing risks of economic instability.
High-speed Rail Debt Crisis
As early as 2019, concerns about China’s high-speed rail debt had emerged, with reports indicating high debt levels and operating losses. By mid-2022, the state-owned China Railway Group’s debt had surpassed 6 trillion yuan ($828.5 billion).
Economists highlight that the large-scale infrastructure investments, including high-speed rail, are exacerbating China’s debt woes and risking economic hard landing scenarios.
Experts emphasize that China’s current industrial overcapacity, coupled with high idle capacity in high-speed rail, represents a critical overcapacity issue fueled by excessive infrastructure development without adequate market demand.
Ning Haizhong and Yi Ru contributed to this report.
