Hello everyone, today we are going to talk about China's infrastructure, especially subways and high-speed railways. A few days ago, there was news that after the real estate industry's explosion, the next industry that may have problems is the subway industry. This is not groundless, and we must analyze it carefully.
Let's talk about Shenzhen Metro first. This is one of the few profitable subway companies in the country, but it also lost more than 30 billion yuan last year, with an average daily loss of 100 million yuan! One of the important reasons for this is the failure of real estate investment. Investing in Vanke Group's projects has lost a lot of money.
The Truth About Subway Losses: The Blame Lies in the Over-Construction Model?
In fact, the national railways, including Beijing Railway, are basically losing money. Take Beijing Railway as an example. So many people ride it every day, but it still loses 55.5 billion yuan a year. Why is this?
The problem lies in the "over-construction" model. Capitalist countries build railways in places with large populations to ensure passenger flow, and even if they don't make a lot of money, they can achieve a balance of payments. But our country is different. In order to drive the economy, railways are built in third- and fourth-tier cities, and even some remote areas, hoping to stimulate local real estate demand through railways, build houses, sell properties, and build shopping malls to increase fiscal revenue and improve people's lives.
This model can be maintained when the real estate market is good, but once house prices collapse, the problem is exposed. Railway passenger flow cannot increase, operating costs are high, and debt and losses become inevitable. Moreover, our country's railway ticket prices are very cheap, only a few yuan per trip, which cannot cover the cost at all, so the more people ride, the more losses there are.
Calculated in this way, it is not surprising that China's subways lose 100 to 200 billion yuan a year. Even more exaggerated is that the current high-speed rail debt has reached more than 6 trillion yuan, and interest alone costs hundreds of billions of yuan a year. Coupled with operating losses, this hole is getting bigger and bigger.
Railways are Measures to Benefit the People, but Social Economy is More Important
Some people may say that railways are measures to benefit the people, and losses are normal. This is true. Railways do facilitate everyone's life, save travel time, and create social value. But the problem is that from the perspective of economic history, we need to consider the concept of "social saving".
The concept of social saving was proposed by Nobel Prize winner Robert Fogel. He studied the history of American railways and found that the contribution of railways to the American economy was actually overestimated. Railways only brought 5% economic growth, and this 5% growth could actually be achieved in other ways.
For example, if railways are not built, shipping can be developed. The United States has many coastal areas, and shipping can completely replace rail transportation. Alternatively, canals, rivers, and even horse-drawn carriages can be used. Fogel's research shows that if railways are not used, other methods can also create 2.1% economic growth. That is to say, the social cost truly saved by railways is only 2.7% of the GNP.
Alternatives to High-Speed Rail: Airplanes and Highways
By the same token, if our country does not build so many high-speed railways, can other methods be used to meet travel needs? For example, the aviation industry can be vigorously developed, like the United States and the United Kingdom, with airports everywhere, and airplanes can be used to replace high-speed railways. Moreover, civil aviation is operated by the market, which will not lead to losses in the central government's finances.
Alternatively, highways can be vigorously developed, like the United States, to develop a highway travel culture. Although building highways also requires government investment, the repair cost is much lower than that of high-speed railways, which will not lead to trillions of debt.
For example, London had high-speed rail more than 30 years ago, but why didn't it build railways as densely as our country? Because they considered the issue of social saving. In London, if you want to go to Birmingham, it takes about two hours by car, and several people can sit in one car. Why spend more time and money to go to the city center to take high-speed rail?
Therefore, high-speed rail is not the only option. In the case of limited resources, we need to choose more economical and sustainable solutions.
Comparison of High-Speed Rail Model with History: The Great Wall and the Grand Canal
Let's take a look at China's large-scale infrastructure projects in history, such as the Great Wall of Qin Shihuang and the Grand Canal of Emperor Yang of Sui.
| Infrastructure Project | Short-Term Impact | Long-Term Impact |
|---|---|---|
| Great Wall | Popular resentment | Resisting foreign enemies and maintaining border security |
| Grand Canal | Millions of migrant workers suffered | Promoting the exchange of materials between the North and the South |
The Great Wall did bring suffering to the people in the short term, and the story of Meng Jiangnv crying at the Great Wall reflects the situation at that time. But in the long run, the Great Wall effectively resisted the invasion of foreign ethnic groups such as the Huns, maintained border security, and had a profound impact on Chinese history.
The Grand Canal is the same. Emperor Yang of Sui spent a lot of manpower and material resources to build the Grand Canal, which led to widespread suffering and ultimately accelerated the demise of the Sui Dynasty. But in the long run, the Grand Canal promoted the exchange of materials between the North and the South and played an important role in China's economic development.
But high-speed rail is different from the Great Wall and the Grand Canal. The Great Wall and the Grand Canal are harmful in the short term and beneficial in the long term, while high-speed rail is beneficial in the short term and may be harmful in the long term.
| Infrastructure Project | Features |
|---|---|
| Great Wall, Grand Canal | Less resource investment in the later period |
| High-Speed Rail | Requires continuous investment of a large amount of funds for maintenance, and is tied to real estate |
This is because the Great Wall and the Grand Canal require relatively less resource investment in the later period and do not require continuous issuance of bonds to repay interest. High-speed rail not only requires continuous investment of a large amount of funds for maintenance, but also is tied to real estate. Once there is a problem in the real estate market, the operation of high-speed rail will also be affected.
The Essence of the High-Speed Rail Model: Keynesianism + Chinese Characteristics
From an economic point of view, the essence of the high-speed rail model is Keynesianism, that is, stimulating economic development through government investment. However, in our country, this model has also added some "Chinese characteristics," such as high-ranking officials blindly investing in order to pursue GDP growth, leading to some unnecessary waste.
Therefore, high-speed rail can indeed bring convenience to everyone and promote economic development in the short term. But in the long run, it may lead to the depletion of social resources and leave a heavy debt burden on future generations.
The UK's decision to stop building high-speed rail is actually based on the same consideration. They believe that replacing high-speed rail with other private methods may be more economical and sustainable.
Although London's subway is old, it is profitable and only requires a small amount of subsidies from the central government each year. Because they adhere to market-oriented operations, do not blindly pursue high-end and large-scale projects, but focus on practicality.
Therefore, we need to reflect on our country's high-speed rail model. While pursuing development speed, we must also consider social savings and choose more economical and sustainable solutions in order to truly achieve long-term economic prosperity.
Now our high-speed rail network is very developed. This is the advantage of "latecomer advantage." However, when the next generation of technology appears, we may also lag behind due to over-reliance on high-speed rail. Therefore, we need to maintain an open mind, constantly learn and innovate, in order to remain invincible in future competition.