PRC Economy and Industry: News and Discussions

[Shankas]

You're missing many things in your analysis. First, the volume is expected to be much greater. As somebody mentioned before, the point of the high speed rail system is to make it a DAILY commute for literally tens of millions of people who live 50-100+kms away from major metropolitan areas like Shanghai. Economy of scale indicates that there need not to be $30 dollars per ticket set aside for each passenger just to pay for interest.

Let's do some math:

Let's say 20 million Chinese make the daily trip, pretty conservative estimate. They'd be making 250(50 work weeks x 5 work days per week) trips a year, which makes for 5 billion trips per year. Divide 6 billion by that and you get $1.2 per trip, or about 20*1.2 = $24 per month. Suppose the monthly ticket costs $200 per month, which is reasonable considering places like Beijing/Shanghai's average income is at least about $500-700 per month higher than the national average. That way, you're left with $176 per month(or $42 billion per year) to pay for maintenance, fuel, security, etc. The NY subway system costs about $1.9 billion(1) per mile to construct, and they expect to recuperate the costs with ~$100 monthly passes, while the Chinese high speed rail system costs about $20 million(2) per kilometer(about 1.6% the cost).

Notice that I'm ONLY counting people who make daily trips. It's likely that a huge percentage of people wouldn't have monthly passes(in NY, about 1/3 of the people use monthly passes(3)), so that further drives the cost down. Add that to the rising living standards of the people and the increased productivity expected from the rail system, it may not be a cash cow without financing reforms as mentioned in Theo's article, but it's hard to imagine that it'll be a "tremendous waste".

(1)http://www.city-journal.org/2010/20_2_s ... ssons.html
(2)http://en.wikipedia.org/wiki/High-speed_rail_in_India
(3)http://www.huffingtonpost.com/2010/07/2 ... 62619.html

I am fascinated and amazed. Can you take your calculations a bit further and show us how many trains will be run, city pairs, number of passengers per train, average hours train will run daily, etc.

[starek]

Let's take a look of Beijing-Tianjin HSR, 114km long, 350km/h, a part of Beijing-Shanghai HSR.
Total investment ￥20.24 b, half of them are loan.
Opened in Oct.1 2008, by Sept.30 2009, this HSR:
passenger 18.7 m
revenue ￥1.1 b
expenditure ￥1.8 b (interest ￥0.6 b, depreciation ￥0.5 b, electricity bill & equipment maintenance ￥0.4 b)
loss ￥0.7 b

The govt. investors could not recoupe their total investments in long-term, but cash flow is healthy because of depreciation is nothing about cash. There are no danger of bankruptcy about this HSR.
http://fans.railcn.net/redirect.php?tid ... o=lastpost

[vina]

The govt. investors could not recoupe their total investments in long-term, but cash flow is healthy because of depreciation is nothing about cash

.. ..

If the Chinese accounting is going to be on these lines, then the rest of the world has nothing to fear. Shanghai Stats and now what Anhui Accounting?

Yes, depreciation is a non-cash expense , so it does not affect statement of cash flows and yes, you do need to add back depreciation and amortization to the Net Income to get free cash flow. But however, if you are talking of Free Cash Flow, you do need to make CapEx going forward to "maintain and restore operations" , so it is really not "Free" in that sense. Ah, okay, you can cheat and say I aint going to make any CapEx, but what will happen when you need to replace the rolling stock and the lines and electrical equipment and stuff after the 4 years or so of usage as normal, you get hit with a whopper of a bill, and if you didn't charge deprecation to your earnings to finance that CapEx, where are you going to get that money from ? Ah, let me guess, another govt grant?

As the Guru who taught me this stuff said, do not touch anything that does not charge depreciation with a barge pole. Just run away from it as fast as you can.

[Abhijeet]

DavidD, your analysis seems plausible to me. A couple of questions:

- Would a monthly pass of $200 really be affordable for the majority of Chinese commuters? That seems high if I convert it to Indian rupees (Rs. 10K), even given higher incomes in China. In general, putting aside $1.20 just as interest payment on every trip seems high to me, since that number (Rs. 75 or so) is more than the entire cost of a single commute for a typical commuter in an Indian city.

- Why is the cost of the Chinese high speed rail two orders of magnitude lower than the New York City subway system?

Overall, though, it does seem possible that there could be 5 billion trips on the high speed trains per year, which could make them viable.

[starek]

The govt. investors could not recoupe their total investments in long-term, but cash flow is healthy because of depreciation is nothing about cash

.. ..

If the Chinese accounting is going to be on these lines, then the rest of the world has nothing to fear. Shanghai Stats and now what Anhui Accounting?

Yes, depreciation is a non-cash expense , so it does not affect statement of cash flows and yes, you do need to add back depreciation and amortization to the Net Income to get free cash flow. But however, if you are talking of Free Cash Flow, you do need to make CapEx going forward to "maintain and restore operations" , so it is really not "Free" in that sense. Ah, okay, you can cheat and say I aint going to make any CapEx, but what will happen when you need to replace the rolling stock and the lines and electrical equipment and stuff after the 4 years or so of usage as normal, you get hit with a whopper of a bill, and if you didn't charge deprecation to your earnings to finance that CapEx, where are you going to get that money from ? Ah, let me guess, another govt grant?

As the Guru who taught me this stuff said, do not touch anything that does not charge depreciation with a barge pole. Just run away from it as fast as you can.

Maintance and operating cost are excluded, I've said. Depreciation is a common used tax avoidance.

[starek]

- Why is the cost of the Chinese high speed rail two orders of magnitude lower than the New York City subway system?

Construction cost of Chinese HSR is only $1 million per kilometer, land acquisition fee is another $1 million.
I dont know USA, but in Deutschland and France, HSR construction cost is just a little higher than China, $1.2~1.5 million per kilometer, but the total cost is about $20 million per kilometer.

[Theo_Fidel]

I feel for the IRFC which leases rolling stock to IR. What fools they are for depreciating their equipment and struggling to show a profit. Their total debt load at present is about $7 Billion. This essentially all of IR's debt. I imagine what it would be for IR to raise a debt load of $150 Billion over the next 10 years.

- We could build a Delhi metro in 50 cities.
- We could build 75,000 kms of conventional railway lines.
- We could build 100,000 kms of freight corridors. (no stations needed)
- We could build about 20,000 km of HSR w/ all new rolling stock

And here we are struggling with the financial closure for $5 Billion freight corridor. What fools our bania's are.

As far as depreciation and interest, my dad has always told me to imagine every rupee note I hold is on fire. Every year the fire of inflation consumes 5% or so of the note. All the wealth you hold can be burnt away in no time if you don't fight to stay ahead of that fire. Why does even one of the Panda trolls not understand this. How insane can they be to not see it.

More than anything I feel for the Chinese people. They are being taken for a ride and their life saving squandered. And they can't even do anything about it.

[starek]

I feel for the IRFC which leases rolling stock to IR. What fools they are for depreciating their equipment and struggling to show a profit. Their total debt load at present is about $7 Billion. This essentially all of IR's debt. I imagine what it would be for IR to raise a debt load of $150 Billion over the next 10 years.

- We could build a Delhi metro in 50 cities.
- We could build 75,000 kms of conventional railway lines.
- We could build 100,000 kms of freight corridors. (no stations needed)
- We could build about 20,000 km of HSR w/ all new rolling stock

We could build.....

Chinese never say "We could build...", they say "We have built ..."

[starek]

More than anything I feel for the Chinese people. They are being taken for a ride and their life saving squandered. And they can't even do anything about it.

http://www.eeo.com.cn/ens/Industry/2010 ... 5005.shtml

Why China Railway Construction Corporation Lost Money on the Mecca Light Railway

The Mecca Light Rail, constructed by the China Railway Construction Corporation Limited (CRC) for Saudi Arabia, will become operational on November 13. Zhao Guangfa, president of CRC said within the company that this project was more a political mandate than a commercial project. Failure was not an option.

The CRC has finished the task, but it has cost them 4.15 billion yuan in losses.

According to one insider with the CRC, the company was recommended by the Ministry of Commerce to construct the railway. It negotiated directly with Saudi Arabia on pricing the project (price discussion) instead of inviting a public biding. At that time, the CRC thought the project would be profitable.

“Price discussion” allows the purchaser to negotiate the price of the project with one of the selected service-providers. It is not open to the public nor is it competitive. Although it may save time and is a flexible process, it easily opens the door to backdoor deals.

The Mecca Light Rail is 18.06 kilometers long and the predicted construction period was around 22 months. The price of the contract was 12.07 billion yuan, based on the exchange rates of September 30. But the cost of the project had already reached 16.06 billion yuan by September 30, incurring a loss of 3.99 billion yuan. Adding the 154 million financial fee, the total loss of the project is around 4.15 billion yuan.

This is the largest loss Chinese enterprises have ever suffered on an overseas project. The CRC had earned a net profit of 3.37 billion in the first half of this year, but suffered a 1.36 billion yuan loss in the third quarter because of the Mecca Light Rail, dragging its revenue down 193.52 percent from the same period last year.

Some insiders have said that although the MMRA’s capriciousness and delays are responsible for the CRC’s losses, the core reason still lies in the CRC’s inadequate evaluation of potential risks. It lacks experience in constructing overseas projects based on American and European standards and has done a poor job in reducing risks in drafting contracts.

But the root of the failure lies in the crude organization and working habits the CRC formed when constructing railways at home. But when the company goes global, facing a complicated international environment, these problems will create many complications.

Lu Duojia said that for the CRC, following the SOEs’ strategy of “going global” was one of their largest risks. There had been too many cases of failures and the SOEs should learn from their mistakes.

Why this company share prices(SHA:601186) moved ahead accordding to the news?

[Theo_Fidel]

http://www.eeo.com.cn/ens/Industry/2010 ... 5005.shtml

Why China Railway Construction Corporation Lost Money on the Mecca Light Railway

The Mecca Light Rail, constructed by the China Railway Construction Corporation Limited (CRC) for Saudi Arabia, will become operational on November 13. Zhao Guangfa, president of CRC said within the company that this project was more a political mandate than a commercial project. Failure was not an option.

The CRC has finished the task, but it has cost them 4.15 billion yuan in losses.

According to one insider with the CRC, the company was recommended by the Ministry of Commerce to construct the railway. It negotiated directly with Saudi Arabia on pricing the project (price discussion) instead of inviting a public biding. At that time, the CRC thought the project would be profitable.

“Price discussion” allows the purchaser to negotiate the price of the project with one of the selected service-providers. It is not open to the public nor is it competitive. Although it may save time and is a flexible process, it easily opens the door to backdoor deals.

The Mecca Light Rail is 18.06 kilometers long and the predicted construction period was around 22 months. The price of the contract was 12.07 billion yuan, based on the exchange rates of September 30. But the cost of the project had already reached 16.06 billion yuan by September 30, incurring a loss of 3.99 billion yuan. Adding the 154 million financial fee, the total loss of the project is around 4.15 billion yuan.

This is the largest loss Chinese enterprises have ever suffered on an overseas project. The CRC had earned a net profit of 3.37 billion in the first half of this year, but suffered a 1.36 billion yuan loss in the third quarter because of the Mecca Light Rail, dragging its revenue down 193.52 percent from the same period last year.

Some insiders have said that although the MMRA’s capriciousness and delays are responsible for the CRC’s losses, the core reason still lies in the CRC’s inadequate evaluation of potential risks. It lacks experience in constructing overseas projects based on American and European standards and has done a poor job in reducing risks in drafting contracts.

But the root of the failure lies in the crude organization and working habits the CRC formed when constructing railways at home. But when the company goes global, facing a complicated international environment, these problems will create many complications.

Lu Duojia said that for the CRC, following the SOEs’ strategy of “going global” was one of their largest risks. There had been too many cases of failures and the SOEs should learn from their mistakes.

[starek]

http://www.eeo.com.cn/ens/Industry/2010 ... 5005.shtml

Why China Railway Construction Corporation Lost Money on the Mecca Light Railway

The Mecca Light Rail, constructed by the China Railway Construction Corporation Limited (CRC) for Saudi Arabia, will become operational on November 13. Zhao Guangfa, president of CRC said within the company that this project was more a political mandate than a commercial project. Failure was not an option.

The CRC has finished the task, but it has cost them 4.15 billion yuan in losses.

According to one insider with the CRC, the company was recommended by the Ministry of Commerce to construct the railway. It negotiated directly with Saudi Arabia on pricing the project (price discussion) instead of inviting a public biding. At that time, the CRC thought the project would be profitable.

“Price discussion” allows the purchaser to negotiate the price of the project with one of the selected service-providers. It is not open to the public nor is it competitive. Although it may save time and is a flexible process, it easily opens the door to backdoor deals.

The Mecca Light Rail is 18.06 kilometers long and the predicted construction period was around 22 months. The price of the contract was 12.07 billion yuan, based on the exchange rates of September 30. But the cost of the project had already reached 16.06 billion yuan by September 30, incurring a loss of 3.99 billion yuan. Adding the 154 million financial fee, the total loss of the project is around 4.15 billion yuan.

This is the largest loss Chinese enterprises have ever suffered on an overseas project. The CRC had earned a net profit of 3.37 billion in the first half of this year, but suffered a 1.36 billion yuan loss in the third quarter because of the Mecca Light Rail, dragging its revenue down 193.52 percent from the same period last year.

Some insiders have said that although the MMRA’s capriciousness and delays are responsible for the CRC’s losses, the core reason still lies in the CRC’s inadequate evaluation of potential risks. It lacks experience in constructing overseas projects based on American and European standards and has done a poor job in reducing risks in drafting contracts.

But the root of the failure lies in the crude organization and working habits the CRC formed when constructing railways at home. But when the company goes global, facing a complicated international environment, these problems will create many complications.

Lu Duojia said that for the CRC, following the SOEs’ strategy of “going global” was one of their largest risks. There had been too many cases of failures and the SOEs should learn from their mistakes.

Why this company share prices(SHA:601186) moved ahead accordding to the news?

[Theo_Fidel]

http://www.moneylife.in/article/72/11422.html

China: Why tightening will not work

The paper cited a source from the ministry of housing and urban-rural development and quoted several unnamed executives from the banks. For example, one anonymous credit department executive at the Industrial and Commercial Bank of China (ICBC) was quoted as saying, "It is impossible to extend fresh loans to developers."

What is interesting is that the same newspaper printed a story 10 hours later denying the report. China Daily wrote: "China's top four banks rejected reports that they would stop lending to real estate developers for the remainder of the year." So we have a state newspaper quoting a ministry that was quoting an executive from a state-owned bank, which statement was later denied by the same state newspaper quoting information from the same state-owned banks. Is this sloppy journalism or an intentional 'mistake'? My bet is the latter.

One of the problems with the Chinese economy is that it is still very much dominated by central authorities in Beijing. These authorities have ironically put their faith in the one thing that the government often disregards: the law. The Chinese government likes to try to control its economy, and specifically the real estate market, with regulations. They should know better.

They have been through this before. Starting in late 2007, the Chinese started to put on the brakes for their property markets. Rather than just raise interest rates, they used regulatory methods, including things like credit ceilings, higher down payments, restrictions on third homes and increasing bank's reserve requirements.

The problem with these restrictions is that they don't really work. During the last bubble, banks were supposed to demand a 40% down payment from families seeking second mortgages, but many turned a blind eye if the loan applicant did not hold another property, even if other family members did. They were also supposed to give loans only if the borrower had a certain size apartment, but they never checked.

When the first regulations don't work, the government pushes the brakes a little harder. They use stronger and stronger restrictions and eventually overshoot. By May 2008 prices had fallen by 30%. And the sales volume in Shanghai was 50% lower than a year earlier.

The Chinese reacted to the crash like all other governments have. They started stimulating their economy with a vengeance. In 2009, the government ordered the state-owned banks to start lending, and lend they did. They lent a record 9.6 trillion yuan ($1.4 trillion) in 2009. If the US stimulus had been on a similar size relative to GDP, it would have been $6 trillion.

This year they reigned in the loans a bit, but not much. Their loan target is 7.5 trillion yuan, but that has almost certainly been exceeded. In September alone, China's total lending-including loans from smaller commercial banks-reached 500 billion yuan, far exceeding a previous estimate of 280 billion yuan. In contrast, in 2008 only 4 trillion yuan ($585 billion) was extended in new loans.

It is not surprising that this wall of money created a real estate bubble. The only real question is why it didn't create more inflation. The answer is that it probably has. The reported inflation is 4.4%, but it could be much more. Food prices are up an annualized 10%, 18 staple vegetables are up 62.4%, ginger is up 89.5% and garlic is up 95.8%. Price controls are being considered.

So, now the cycle is repeating itself. This year the government started tightening in February. Like price controls on food, none of these regulations will work. To try to rein this deluge will no doubt take stronger and stronger measures. The Chinese government is desperately trying to avoid what occurred in 2008, which is why the disparity of information is hardly surprising. But since it is using the same tools, undoubtedly it will have the same result. Unfortunately this time, the effects will reach far beyond China.

[VikramS]

I feel for the IRFC which leases rolling stock to IR. What fools they are for depreciating their equipment and struggling to show a profit. Their total debt load at present is about $7 Billion. This essentially all of IR's debt. I imagine what it would be for IR to raise a debt load of $150 Billion over the next 10 years.

- We could build a Delhi metro in 50 cities.
- We could build 75,000 kms of conventional railway lines.
- We could build 100,000 kms of freight corridors. (no stations needed)
- We could build about 20,000 km of HSR w/ all new rolling stock

We could build.....

Chinese never say "We could build...", they say "We have built ..."

I think perhaps English is not your first language, but the whole point of the previous post that using Shangai Statistics and Beijing Bean-Counting, the IR could also raise $150B and be able to make all those projects a reality. Unfortunately, in a world where money is actually accounted for, Shangai Statistics and Beijing Bean-Counting do not work.

BTW, why is the PLA prodding all its neighbours? Whether it is India, the Japanese, the South Korea incident, the PLA is bent on picking up a fight with everyone. Are the Shangai Statistics becoming too hard to justify and war is now the only for the CCP to keep its hold on power?

I also wonder how life is for most Chinese who do not have any siblings. What kind of social-economic impact does it have? A single child is always the center of attention, and it is now perhaps this psychological necessity to be in the lime-light, which is being reflected in the national attitude.

[heech]

As somebody mentioned before, the point of the high speed rail system is to make it a DAILY commute for literally tens of millions of people who live 50-100+kms away from major metropolitan areas like Shanghai

You are confused between a city/suburban metro and a intercity /long distance high speed rail of the kind China is rolling out. Look at Europe and Japan , the two places that is the natural home of high speed trains. Where the sweet spot is between high density city pairs within 3 hours of each other and they compete with short haul airlines!

You are the one who's confused. One Chinese term used for describing THE major component of the high-speed rail system is literally "city-scale train system" (my own poor translation of 城际铁路).

There are three major regions with these "city-scale train system" nearing completion:

- Beijing - Tianjin, population ~40 million,
- Nanjing/Shanghai/Hangzhou (Yangtze River valley region), population ~100 million,
- Guangzhou/Shenzhen/Hong Kong (Pearl River valley region), population ~100 million.

Note that the GDP per capita of each of these regions is already > $10,000 USD (nominal terms), and > $30,000 USD in PPP terms. Total travel time from one end of these regions to another will be about 40 minutes, with departures every 5 minutes. The goal and expectation is that all three of these areas will become "super-cities", and high-speed rail will be a huge part of that.

Lets face it. The Chinese high speed roll out is a massive white elephant. The Japanese rolled it out when they were on the cusp of their growth, which died out in 1989 or so and could pay for it later. The Chinese are rolling theirs out when Chinese growth is plateauing and will be a millstone around it's neck when the growth tapers off.

vina, I've been reading your "predictions" about the Chinese economy on this site for close to a decade. You were wrong then, and you are wrong today.

[heech]

Let's take a look of Beijing-Tianjin HSR, 114km long, 350km/h, a part of Beijing-Shanghai HSR.
Total investment ￥20.24 b, half of them are loan.
Opened in Oct.1 2008, by Sept.30 2009, this HSR:
passenger 18.7 m
revenue ￥1.1 b
expenditure ￥1.8 b (interest ￥0.6 b, depreciation ￥0.5 b, electricity bill & equipment maintenance ￥0.4 b)
loss ￥0.7 b

The govt. investors could not recoupe their total investments in long-term, but cash flow is healthy because of depreciation is nothing about cash. There are no danger of bankruptcy about this HSR.
http://fans.railcn.net/redirect.php?tid ... o=lastpost

Thank you for providing actual numbers.

One more key number from that post: average fares on the Beijing/Tianjin line are ~$10 USD a ticket. They're obviously keeping prices very low in order to build critical mass/volume. Number of actual travelers was below expectation however, at 18 million in the first year of use. The expectation is that with continued economic growth, usage will grow significantly. They're hoping for profitability in the 3rd of year of operation.

How did the 2nd year of operation go for the Beijing/Tianjin line...? Through October 2010?

[heech]

How did the 2nd year of operation go for the Beijing/Tianjin line...? Through October 2010?

I will answer my own question. And just to re-iterate, this is a "city-scale train system"... 40 minutes to go from terminal/terminal, Beijing/Tianjin.

http://money.163.com/10/0918/01/6GQUMMG100254ITK.html

- in two years, 104000 total runs, 41 million total passenger-trips (140 trips a day).
- in the second year of operation, 25 million passenger-trips (increase of 25% from the first year),
- occupancy rate was 75% in the second year.
- revenue was 1.4 - 1.7b. expenses (including deprecation) are still expected to be around 1.8b... meaning the second year was still a losing year.
- sustained profitability isn't expected until 40 million passenger-trips a year, when the system will pay out 0.5b in profits a year. Assuming passenger traffic grows at 25% a year, it'll reach that level in 2 years.
- projections are that the system will pay for itself in full over the next 16 years.

[heech]

I could fly between San Jose and LA for around $50/60 and at times for as low as $30.. a distance of around 400 miles /700 +- odd kms in around 45mins. And that $50 included all costs paid and enough left over for SW Airlines to earn a very very respectable return!.

I thought I already replied to this... but in any case.

Most people understand that an airline's marginal expense of carrying an additional passenger is very close to zero. They will fill their planes at any cost (without cannibalizing future demand), even if they have to sell tickets for a dollar. So, you can't look at *minimum* cost of a ticket for that trip... you have to look at average cost. Southwest.com shows $163 is the fare for a trip tomorrow on that flight for business travelers, which is their most important customer segment.

And just to reiterate, the cost of a ticket from Beijing to Tianjin is $10 USD. Cost of a ticket from Hangzhou to Shanghai is $15 USD (for a second-class ticket).

What about running costs, fuel, maintenance and facilities and security and other plethora of costs, why you wont even break even until you price it at $90/$100 and a further $20 to $30 above that to earn a decent economic return and you are not even talking taxes here.

That's exactly the point. One of the major advantages of HSR over air flight is the MUCH lower fuel/maintenance costs... especially when you scale up to hundreds of millions of passengers a year.

[shynee]

Saudi to deport 16 Chinese after Makkah riots

Saudi Arabia will deport 16 Chinese workers for participating in riots, which erupted in Makkah two days ago to demand higher wages, the Saudi Arabic language daily Alwatan reported on Thursday.

The workers belong to the Chinese company which has built Makkah’s first railway metro to transport Muslim pilgrims into and out of the city, Islam’s holiest shrine, during the Haj (pilgrimage) season, it said.

“Authorities are taking measures to deport those 16 workers after investigation showed they were involved in the riots that resulted in the damage of four cars…they also instigated their colleagues to stop work to demand higher wages because of the hot weather,” the paper said.

[vina]

vina, I've been reading your "predictions" about the Chinese economy on this site for close to a decade. You were wrong then, and you are wrong today.

Not me. I havent been on this site for that long. In fact, I started even reading this site only after I returned to India in the early-mid part of this decade.

On the other hand, I think my record in terms of predictions has been pretty good (after all, I did call the financial crisis correctly, and named Bear Stearns and Lehmann as goners and saw the ICICI Kerfluffle coming). Mark my words. For anyone with eyes, it is obvious that China has created a massive global imbalance and that imbalance has to go somewhere internally in China as a mirror image and that went into the infrastructure splurge driven by a binge of debt.

No sir. NYC with a 100+ year old system, largely fully depreciated and with nearly the entire population using it, prices it's 30 day tickets at around $45 or so (sticker price 89, but after discount you get it for 45) . Now you are telling me that a system with far less density than the NYC subway, but costs more on a per km basis on operating costs, with full depreciation and accounting costs that still need to be paid for (it is spanking new after all) and with a population (Beijing & Shanghai even) where the income levels are 1/4th or less than in NYC, can pay for a system where the ticket prices will be far higher than what most people can afford and hence fewer people use it and still make economic sense ?. It simply doesn't add up, except in Ahui Accounting / Beijing Bean-Counting.

[vina]

Chinese never say "We could build...", they say "We have built ..."

"We have built" ..yes, and done some incredibly stupid things. I can name the Shanghai Maglev for one.

"We have done" even more stupid things , like the Cultural revolution and the "great leap forward" (tell that that to the 30million odd chinese who died of starvation).

That is the problem with the top down, totalitarian system. You can shoot first and regret later or better still not even have to regret.

BTW, has the CPC ever apologized for the "Great Leap" and the "Cultural Revolution" and Tianenman Square ?

[vina]

Most people understand that an airline's marginal expense of carrying an additional passenger is very close to zero. They will fill their planes at any cost (without cannibalizing future demand), even if they have to sell tickets for a dollar.

For someone who uses big words like "Marginal Expense" and airlines (yeah, Samuelsen's Econ 101 book calls an Airplane as a thing that has Marginal costs with wings), what is the marginal for a railroad company to carry every additional passenger ? (hint.. airline .. marginal cost with wings, trains, marginal costs with steel wheels ?) . . Err. And the railroad system has far far higher fixed costs and capital intensity than an airline.

So, you can't look at *minimum* cost of a ticket for that trip... you have to look at average cost. Southwest.com shows $163 is the fare for a trip tomorrow on that flight for business travelers, which is their most important customer segment.

Go ahead,look at it. SW airline is usually one class and though they do price discrimination for yield management, it is no where near what a conventional airline does with the business and first class cross subsidizing the cattle class. If the peak far at SW is $163, the avg will be closer to $75-80 I would think. No way in hell a chinese HSR for 400miles is going to return even a dime at $75-80 a passenger on avg.

[wrdos]

Vina, I totally agree with you.

China will finish >4000km high speed railways, >1000km subways, and>8000km expressways, within a single year, by consuming >50% the world's steel. It is too crazy and too dangerous. And more importantly, the country has been doing this kind of crazy things for years.

I just think the Indian way of economy growth is a much better choice, especially for the earth. It is just natural, green and sustainable. In fact, I just hope every other nation in the world would follow the Indian way of growth, so friendly and so harmless.

I have been living in Japan for the past 10 years. I have been traveling the developed world every several months. To tell the truth, I know to their deep hearts why the whole developed world keeps praising India and cursing China.

As a Chinese, I pray that China will become the last country to grow by the cursed "Chinese way".

[amit]

As a Chinese, I pray that China will become the last country to grow by the cursed "Chinese way".

Now, now Wrdos such delicious sarcasm. What would Chairman Mao say? More importantly did you clear that with your party boss?

NB: The Indian way is to always talk with tongue (fully) in (the) cheek!

[DavidD]

How did the 2nd year of operation go for the Beijing/Tianjin line...? Through October 2010?

I will answer my own question. And just to re-iterate, this is a "city-scale train system"... 40 minutes to go from terminal/terminal, Beijing/Tianjin.

http://money.163.com/10/0918/01/6GQUMMG100254ITK.html

- in two years, 104000 total runs, 41 million total passenger-trips (140 trips a day).
- in the second year of operation, 25 million passenger-trips (increase of 25% from the first year),
- occupancy rate was 75% in the second year.
- revenue was 1.4 - 1.7b. expenses (including deprecation) are still expected to be around 1.8b... meaning the second year was still a losing year.
- sustained profitability isn't expected until 40 million passenger-trips a year, when the system will pay out 0.5b in profits a year. Assuming passenger traffic grows at 25% a year, it'll reach that level in 2 years.
- projections are that the system will pay for itself in full over the next 16 years.

Thank you for the numbers, considering that the line will probably run for many decades and that the HSR is estimated to have a 1-1.5% boost to regional GDP, it seems like a pretty good investment.

Vina, why the complete aversion to comment on our calculations or perform your own calculations? How about you quit philosophizing use some real numbers to back up your story? How about you look up SW airline's operating costs? How much does it take for them to transport say 25 million passenger per year, how much initial investment is required, and how much do they actually charge and how much do they make?

[abhischekcc]

Oh oh

[PrasadZ]

@wrdos :

To tell the truth, I know to their deep hearts why the whole developed world keeps praising India and cursing China.

Now you will tell me the Chinese read 8000 hearts a day? Or, considering the cost efficiency of cheap Chinese labour, would you make it 8000 hearts per second?!

On a serious note,
The numbers are impressive in demonstrating the organisational abilities of the PRC. They are an achievement and they should be celebrated. But they are an achievement of a single party system that supports an out and out terrorist regime like North Korea (of course, many Indians are going to post "hey pakistan" in response, but NoKo, IMO, does not have even the fig leafs of democracy and HDI that Pakistan has). wrdos, I dont need to read hearts to know why everyone curses China - coz the koreans and japanese i know tell me exactly why. You could talk to them too - but maybe your heart is closed?

[wrdos]

Japan and Korea? who cares.

Vietnam is also single party, which copies almost every CPC's policy. Even the Vietnamese Foreign Ministry's website was totally a copy of Chinese Foreign Ministry's, hehe.

Vietnam: http://www.mofa.gov.vn/en#D4M8uxiKrIbN
China: http://www.mofa.gov.vn/en#D4M8uxiKrIbN

It is really a pity that our ministry updated the site recently. Otherwise...

And, you never heard they cursing the country of Vietnam, right?

Why?

They are poor and small, thus harmless.

There is an old Chinese saying, flattering killing.

It is right the current western attitude towards India. They could not afford another China anymore.

To tell the truth, one China is enough. I agree with the western in this issue at least.

@wrdos :

To tell the truth, I know to their deep hearts why the whole developed world keeps praising India and cursing China.

Now you will tell me the Chinese read 8000 hearts a day? Or, considering the cost efficiency of cheap Chinese labour, would you make it 8000 hearts per second?!

On a serious note,
The numbers are impressive in demonstrating the organisational abilities of the PRC. They are an achievement and they should be celebrated. But they are an achievement of a single party system that supports an out and out terrorist regime like North Korea (of course, many Indians are going to post "hey pakistan" in response, but NoKo, IMO, does not have even the fig leafs of democracy and HDI that Pakistan has). wrdos, I dont need to read hearts to know why everyone curses China - coz the koreans and japanese i know tell me exactly why. You could talk to them too - but maybe your heart is closed?

[vina]

Vina, why the complete aversion to comment on our calculations or perform your own calculations?

Until recently, my job was to look at all sorts of "projections" from all sorts of people and guess what, if anyone took anyone's projections at face value without huge dollops of salt, everybody and his father in law will be bankrupt.

I know it is difficult for a totalitarian marching in lock-step regimented society to be skeptical about anything, most of all govt projections. But if you are actually running a business or deal with real world uncertainties (simple thing like projecting how much demand will be for air traffic this holiday season should do fine, or how many sweaters of a particular fashion should I make and stock, if you are merchandizer kind of thing)you actually take a pretty jaundiced eye to any projection.

All your calculations/projections, I would simply discount them by a 1/3rd to a half and bump up your costs by 35% and then do a sensitivity analysis around it.

Sorry, I have seen too many projections all my life to not have a jaundiced eye on it. For eg, how many folks will remember stuff from high faluting consultants like B2B e-commerce will be a $x trillion opportunity by 2002 and if you dont do A, B &C (and also hire us of course), you are toast.

How about you quit philosophizing use some real numbers to back up your story? How about you look up SW airline's operating costs? How much does it take for them to transport say 25 million passenger per year, how much initial investment is required, and how much do they actually charge and how much do they make?

Ah. What is reality and what is philosophy ?. SW airline has been in business for nearly 30 years, I have flown SJ to LA for $50 (cheapest being $30) if I plan in advance, usual price around $80 to $100 (not walk up fare), SW airlines is followed by tons of industry , stock , bond analysts and competitors, heck it is even a Harvard Business School case study (Haarbird if Enqyoob would have it), you can go back and find every financial report of theirs for all their years of operations , everyone knows everything about them.

On the contrary, no one knows anything about the CHinese HSR system, all we have are "projections" from all sorts of folks which like I said, any sane person would simply disbelieve unless proven otherwise. So not worth considering your "projections" seriously.

After all, what is real ?. SW's track record and transparent performance or is it the airy fairy figures of the Chinese ?

[Theo_Fidel]

Suggest we not engage the trolls. Their only aim is to disrupt the thought processes in this forum.
If you notice all of them carefully frame their questions to divert us into one fox hole or the other.
And they take turns ganging up on one forum member or the other.

Even admins seem to not notice this.

Suggest we only respond to each other.

[hnair]

Chinese never say "We could build...", they say "We have built ..."

"We have built" ..yes, and done some incredibly stupid things. I can name the Shanghai Maglev for one.
?

The People's Manual for Make Benefit Internet for such occasion says:
- Insert "Chinese never say "We could build...", they say "We have built ..."
- Add no less than two, better three emoticons of approved color laughing in a rigid uniform way like this
- Deny existence of brave "People's Revolutionary Photoshoppers" if "We have built...." is laughed at

Vina-saar you are making them confushyte more on this forum - may the wrath of a thousand sacred FooTu ShiPus be on you

[heech]

No sir. NYC with a 100+ year old system, largely fully depreciated and with nearly the entire population using it, prices it's 30 day tickets at around $45 or so (sticker price 89, but after discount you get it for 45) . Now you are telling me that a system with far less density than the NYC subway, but costs more on a per km basis on operating costs, with full depreciation and accounting costs that still need to be paid for (it is spanking new after all) and with a population (Beijing & Shanghai even) where the income levels are 1/4th or less than in NYC, can pay for a system where the ticket prices will be far higher than what most people can afford and hence fewer people use it and still make economic sense ?. It simply doesn't add up, except in Ahui Accounting / Beijing Bean-Counting.

I have no idea why you believe New York City is a useful reference point. China is doing any number of things that the United States can *not* pull off.

First of all, the regions we are talking about are an order of magnitude larger than New York City. Again, the Yangtze river region (Zhejiang/Jiangsu/Shanghai) has a population of approximately 200 million. Compare that versus the New York/New Jersey metropolitan region, which has a population of 20 million. For the metropolitan area, the Yangtze river delta has a population density approximately 2-4x that of New York. Second of all, the United States has tremendous inefficiencies, especially a) in 100-year old infrastructure, b) over-paid/over-pensioned public service sector. Note the recent failure of the effort to build a new tunnel between New Jersey and New Jersey.

Why in the world do you think this is an orange to orange comparison?

Let's just talk actual numbers relevant to China. The numbers are already above. The Beijing/Tianjin HSR system is expected to pay for itself in 16 years on $10 USD/trip fares. The Yangtze HSR system will probably be pay off over 20 years, on $10-$15 USD/trip fares.

You know what *is* an orange-to-orange comparison: California's attempt to launch a high-speed rail system going from San Jose to Los Angeles. Speaking of white elephants... that effort *will* more likely than not become a ridiculous failure.

[sanjaykumar]

There is no question that China's break-neck industrialsation is remarkable.

As remarkable as will be the rates for air-pollution related lung cancer and emphysema, cardiac risk and general system cancers from waterborne pollutants. Pollutants are present in the air, land, water, food, breast milk, body fat etc etc. At least they will be able to better afford medical therapy.

The medical aspects of industrial pollution, food adulteration, neglect of safety standards, disregard of workers' rights is rarely reported in the West and even less so in China.


Ah,,,think of the cadmium, polyaromatic hydrocarbons, aflatoxins, methyl mercury, pesticides, herbicides, illicit antibiotics in the farmed fish, the 1200 new cars on Beijing roads daily, the radiation disasters literally and figuratively buried.. If the Chinese survive, they will be a super-race alright.

It is just as well that Chinese don't consider these things important. But it would be interesting to see the data on neonatal genetic defects from China.

[vina]

But it would be interesting to see the data on neonatal genetic defects from China

Oh, but such data will be "state secrets" . So any brave Chinese researcher who dares publish anything that is remotely close to the truth and not regurgitate the airbrushed garbage from the CPC (for which they will hire N.Ram of The Hindu for greater outside "credibility" of course) will surely face the firing squad in short notice or worse get interned in a lunatic asylum which seems to be the preferred way of the CPC to keep out outspoken independent minds asking disturbing questions aka "trouble makers" out of circulation!

[PrasadZ]

"Japan and Korea? who cares." i do .. then again, am only addressing the forum while pretending to carry on the discussion with you .. so you could argue i dont care about you .. there would be some truth in that as well

"Vietnam is also single party, which copies almost every CPC's policy. Even the Vietnamese Foreign Ministry's website was totally a copy of Chinese Foreign Ministry's, hehe."

Vietnam is no pushover for the chinese. But if you think they are just a copy of China, let me not disabuse you of the notion. I find it interesting you do .. maybe it comes from your ability to read hearts

[heech]

You know what *is* an orange-to-orange comparison: California's attempt to launch a high-speed rail system going from San Jose to Los Angeles. Speaking of white elephants... that effort *will* more likely than not become a ridiculous failure.

A bit of a tangent, but relevant:

http://www.sfgate.com/cgi-bin/article.c ... .DTL&tsp=1

The first leg of the California HSR will be a 54 mile stretch between Fresno (population: 1mm) and Hanford (population: 50,000)... completed by 2017, at the cost of $4.3 billion. And, by the way, it won't actually carry high speed rail traffic for another 20 years. We're talking just the tracks.

This thing is going to end up like the ARC tunnel in New York/New Jersey... a two-decade long, $10 billion project which was just abandoned, throwing away $600 million in the process.

[DavidD]

Vina, why the complete aversion to comment on our calculations or perform your own calculations?

Until recently, my job was to look at all sorts of "projections" from all sorts of people and guess what, if anyone took anyone's projections at face value without huge dollops of salt, everybody and his father in law will be bankrupt.

I know it is difficult for a totalitarian marching in lock-step regimented society to be skeptical about anything, most of all govt projections. But if you are actually running a business or deal with real world uncertainties (simple thing like projecting how much demand will be for air traffic this holiday season should do fine, or how many sweaters of a particular fashion should I make and stock, if you are merchandizer kind of thing)you actually take a pretty jaundiced eye to any projection.

All your calculations/projections, I would simply discount them by a 1/3rd to a half and bump up your costs by 35% and then do a sensitivity analysis around it.

Sorry, I have seen too many projections all my life to not have a jaundiced eye on it. For eg, how many folks will remember stuff from high faluting consultants like B2B e-commerce will be a $x trillion opportunity by 2002 and if you dont do A, B &C (and also hire us of course), you are toast.

How about you quit philosophizing use some real numbers to back up your story? How about you look up SW airline's operating costs? How much does it take for them to transport say 25 million passenger per year, how much initial investment is required, and how much do they actually charge and how much do they make?

Ah. What is reality and what is philosophy ?. SW airline has been in business for nearly 30 years, I have flown SJ to LA for $50 (cheapest being $30) if I plan in advance, usual price around $80 to $100 (not walk up fare), SW airlines is followed by tons of industry , stock , bond analysts and competitors, heck it is even a Harvard Business School case study (Haarbird if Enqyoob would have it), you can go back and find every financial report of theirs for all their years of operations , everyone knows everything about them.

On the contrary, no one knows anything about the CHinese HSR system, all we have are "projections" from all sorts of folks which like I said, any sane person would simply disbelieve unless proven otherwise. So not worth considering your "projections" seriously.

After all, what is real ?. SW's track record and transparent performance or is it the airy fairy figures of the Chinese ?

So in other words, you have nothing to back up your claims other than your skepticism. It's perfectly understandable that you'd have more confidence in a proven franchise such as SW and less in a new, unproven franchise like the Chinese HSR system, but that's no justification for your prediction that it WILL fail.

It's obvious that we won't come to an agreement. You refuse to work with actual numbers, and in any case you refuse to recognize any number coming out of China anyway, so we'll just have to agree to disagree.

[DavidD]

There is no question that China's break-neck industrialsation is remarkable.

As remarkable as will be the rates for air-pollution related lung cancer and emphysema, cardiac risk and general system cancers from waterborne pollutants. Pollutants are present in the air, land, water, food, breast milk, body fat etc etc. At least they will be able to better afford medical therapy.

The medical aspects of industrial pollution, food adulteration, neglect of safety standards, disregard of workers' rights is rarely reported in the West and even less so in China.


Ah,,,think of the cadmium, polyaromatic hydrocarbons, aflatoxins, methyl mercury, pesticides, herbicides, illicit antibiotics in the farmed fish, the 1200 new cars on Beijing roads daily, the radiation disasters literally and figuratively buried.. If the Chinese survive, they will be a super-race alright.

It is just as well that Chinese don't consider these things important. But it would be interesting to see the data on neonatal genetic defects from China.

I assume you mean birth defects, the data aren't too hard to find, just google "birth defects china" and this is the first result:

http://www.reuters.com/article/idUSPEK15525020071029

The rate of defects had risen from 104.9 per 10,000 births in 2001, to 145.5 in 2006, affecting nearly one in 10 families, China's National Population and Family Planning Commission said in a report on its Web site (www.chinapop.gov.cn).

Infants with birth defects now accounted for "about 4 to 6 percent of total births every year," the family planning agency said. Of these, 30 percent would die and 40 percent would be "disabled."

The World Health Organization estimates about 3 to 5 percent of children worldwide are born with birth defects.

Ironically, I can't find the Indian stats, anyone care to link me to one?

[sanjaykumar]

Thanks. I was trying to establish a principle.

The definition of congenital anomalies may vary depending on the jurisdiction. In a country like China and also India, many anomalies may go unreported due to the stigma attached. As the fact that marriage prospects of siblings may be affected.

Howsoever if these data are taken at face value-this is an alarming two-fold increase. One cannot say this if is the background or baseline as these are not secular data.

China already has high cancer prevalence-up to 10-fold or 20-fold higher than India (excluding oral cancers). It is not known if this is lifestyle, infection (HBsAg), or genetic. I would be very careful introducing DNA damaging chemicals to this particular population. In fact this is China's biggest problem- but all they want to discuss is the quantum of commodities bought. Sad.

[sanjaykumar]

Of course there seems to have been a history of consanguinity in China, recently discouraged by the CCP, I believe.

[DavidD]

Thanks. I was trying to establish a principle.

The definition of congenital anomalies may vary depending on the jurisdiction. In a country like China and also India, many anomalies may go unreported due to the stigma attached. As the fact that marriage prospects of siblings may be affected.

Howsoever if these data are taken at face value-this is an alarming two-fold increase. One cannot say this if is the background or baseline as these are not secular data.

China already has high cancer prevalence-up to 10-fold or 20-fold higher than India (excluding oral cancers). It is not known if this is lifestyle, infection (HBsAg), or genetic. I would be very careful introducing DNA damaging chemicals to this particular population. In fact this is China's biggest problem- but all they want to discuss is the quantum of commodities bought. Sad.

Actually, the Chinese people are very conscious about environmental problems. A recent Pew survey indicates that a high majority of people are very concerned, and if you've been keeping up with China you'll see that the Chinese government is trying a lot of different things to curb this problem. Now, not all the tactics work, and I'm sure all the ones that don't work are reported on this board already , but there's definitely a concerted effort. For example, I believe that China's investment in green energy is leading the world at this moment. Keep in mind that CCP officials and rich businessmen breathe the same air everybody else does, so it's unlikely that this problem will be ignored.

As for the high cancer prevalence, I think it's environmental. The pollution is pretty ridiculous over there. However, do keep in mind that starvation, malnutrtion, and preventable diseases have killed many fold more people. Those types of deaths have been reduced drastically due to China's rapid industrialization, which is why China's life expectancy has steadily risen and is now at 73.1.