Thursday, May 21, 2009

Now THAT Is What Stimulus Looks Like

NOTE: We've moved! Visit us at the California High Speed Rail Blog.

China isn't screwing around:

China plans to create the world's largest high-speed rail network. The Chinese Ministry of Railways is planning to buy 1,000 high-speed trains within the next few years. The current order from Siemens (SI) includes the first trains to serve the new high-speed line between Bejing and Shanghai.

German train producer Siemens has inked a $1 billion contract to build 100 new high-speed trains for China. The company's Velaro train has a top speed of 218mph (350.84km/h). A typical train will have 16 cars and carry more than 1,000 passengers. With a total length of more than 1,300 feet (396.24m), the new trains will be the world's longest single high-speed units in use, according to Siemens.

By the end of the first quarter 2009, the approved Chinese railway investment exceeds $292 billion including more than $175 billion investment in the process projects. The data shown in the recent “Research Report on the Investment in Chinese Railway Transport Industry, 2009” indicates that China plans to construct 40-thousand-kilometer railways with the total investments of over $730 billion by 2012.

This is a smart strategy for China, which is a major oil exporter and has to get that oil from countries that are more closely allied to the US than to anyone else. China also has a need to provide sustainable transportation for its population, and a need to provide jobs to its people during a consumer-led recession.

Sound familiar?

Obviously there are differences between the US and China - they have huge currency reserves they can spend on this, whereas the US has huge private, concentrated wealth reserves (thinking of the richest 5% of the population or so) nobody really is willing to touch. But if we have the capacity to blow a trillion on a bank bailout that won't really provide long-term economic growth, surely we can spend more than $13 billion on HSR. Right?

The Infrastructurist has a good take on this:

Dithering and doing things half-way are not among the national character flaws that might be pinned on the Chinese. One has the sense that if that country ever gets serious about greening up, it will do it with a rapidity and effectiveness that will make western nations look downright silly.

And, perhaps, they’re already at it with this plan to build the world’s largest high-speed rail network. As of March 31, China has committed $259 billion to the project, and plans to spend nearly a half trillion dollars more in the next three years, boosting the total investment to $730 billion by 2012.

A little context here: The US–a country with a per capita GDP about 16 times that of China–has set rail as a national priority and has committed… $13 billion. Or, about 2 percent as much in China. This, of course, is in a place where it costs a hell of a lot more to get anything done.

Of the Chinese investment, at least $1 billion is going to the German conglomerate Seimens for the purchase 100 high speed train sets. They will be, on average, 16 cars–or 1300 feet–in length, capable of carrying 1000 passengers, and capable of traveling 218 mph. Moreover, they will be running on tracks designed to accommodate that speed. Unlike, say, the Acela.

Ultimately, the Chinese government plans to buy 1000 high speed trains to run on a track network of around 25,000 miles.

Why, oh, why do we have such difficulty approaching serious projects with the required seriousness in this country?

Sure, sure, China doesn't really have labor or environmental standards, or even democracy. We have each, rightly so, and that adds some time and cost to massive infrastructure projects. The tradeoff is worth it. But those differences don't change the fact that China's moving to better position itself for the 21st century than the US. At least we here in California have stepped up to approve our HSR project, the only thing the US has to offer that comes anywhere near China's plans.

Lest we forget, HSR is seen around the world as a strategic necessity for 21st century prosperity in a global economy. Americans aren't trained to think in those terms, since we found prosperity and global leadership with a 20th century economy based on oil consumption, sprawl, and cars. It's difficult to get people out of that mindset and recognize that times have changed and a new basis of growth and prosperity is needed.

Perhaps China's setting of the bar can inspire Americans to catch up - to California and to the rest of the industrialized world.

26 comments:

Spokker said...

I'd rather have democracy and freedom of speech than high speed rail, though...

Spokker said...

Here's something a Chinese person can't do. Fuck the Chinese Communist Party. :)

無名 - wu ming said...

it's not just HSR either; many of the cities those lines are passing through are getting massive upgrades to their public transit and feeder networks. taiwan is doing much the same, for the same reasons: they see the writing on the wall, and nothing makes a cranky populace happier than big public works projects when your export economy sucks ass. this certainly puts paid to all the "HSR isn't feasible across vast areas like the midwest" claptrap.

money better spent than bailing out wall street, at any rate.

@spokker - not entirely true, chinese talk smack about the CCP with great regularity and vehemence. what they can't do is organize against it. which itself points to the more important aspects of democracy, that of organized activism. governments don't bother banning things that don't threaten bad government, after all.

Anonymous said...

The Australians have seen the writing on the wall also. Check out their recent infrastructure document.

Spokker said...

"what they can't do is organize against it."

Yeah, that's more accurate. Essentially you can do what you want, as long as you don't challenge the government's authority.

This commentary had some interesting things to say about China's stimulus.

"such policy steps can only provide a short-term boost. More fundamentally, unless state- and collective-owned land and state assets are privatized, it’s hard to see how stimulus efforts can transform the investment- and export-oriented economic structure.

China’s private consumption has failed to grow, but not because Chinese consumers don’t like spending. Rather, it’s because most don’t own property and, even though both the economy and asset values have been growing fast, most households don’t feel any wealth effect. According to my compilation of official statistics, the Chinese government owns about three quarters of the country’s productive wealth. For most consumers, wages are their only source of income. And this single income source has grown at a pace far lower than GDP growth rate. Without more and spreading private ownership of assets, there’s not enough wealth effect to boost consumption and private savings pressure will necessarily remain high."

About stimulus specifically.

"For this reason, the just-announced stimulus plan focuses too much on infrastructure and not enough on boosting private consumption. Infrastructure investments will not create as many jobs in the long term. As a result, the multiplier effect from this plan will be lower than one may expect. China must look for other ways to stimulate domestic consumption, instead of relying on the tried-and-true trick of government investment."

China's a very interesting case study. Of course, the whole thing falls apart without strong exports. I hope the crisis pushes even more reforms in China.

Eric said...

@Spokker

Here's something a Chinese person can't do. Fuck the Chinese Communist Party. :)

Awesome. I love you, you cynical bastard. I realize it's not literally true, but the larger point still stands. The majority of Chinese live in grinding third world poverty. So labor is cheap - they still run large numbers of steam trains, for heavens' sake. Now, steam trains are awesome, but the only way you make them work economically in this modern world is if you've got a supply of cheap labor to do things like disassemble a boiler and clean the scale off the firing tubes. Hell, even India eventually had to give up on them.

I'm sure their much ballyhooed high speed trains will allow the well-connected elite to go barrelling about the country in style and comfort, or at least it will give the usual dreary Chinese govt. apologists on the internet yet one more idiotic thing to brag about.

Personally I want the people who build and operate our HSR to be paid a decent wage; I want our system to be run with a decent safety margin, not some ridiculous Chinese govt claim that they run the trains at a higher maximum speed than the manufacturer actually certifies as safe for commercial operation.

So no, I don't give a crap what China claims to be doing.

luis d. said...

Spokker

"I'd rather have democracy and freedom of speech than high speed rail, though..."

As far as I can see, democracy and freedom of speech isn't meaning Sh*t nowadays in the U.S with something that hasn't gone away yet, the word Terrorism. Check out the MASSIVE ammounts of Youtube video's as proof. We might as well just ask for our HSR since our Freedom of speech isn't going far.

This massive amount of spending on HSR in China is Excellent news for HSR development accross the world but Very Bad news for our economy. Pretty soon China will buy all our wastefull debt on building old tech. and own us!

We need more than $13B for HSR or we can't compete!

jim said...

If the chinese annex us maybe they will build us some high speed rail.

Alon Levy said...

Luis: if you think Bush-style abuses of freedom are on the same order as what happens in China, you really need to get out more.

Robert: you have a typo when you say that "This is a smart strategy for China, which is a major oil exporter." You mean major oil importer, not exporter...

Spokker said...

China is getting richer every day, but spread that amongst a billion people, and China is still a third-world shitpile for many Chinese citizens. And they get to endure piss poor legal and financial systems.

"So no, I don't give a crap what China claims to be doing."

I feel the same way when Robert boasts what Argentina is doing with high speed rail. If you think the CHSRA is corrupt, go to Argentina and see how their HSR program is going. There are riots over regular mass transit. Last time I checked no one was setting fire to Diridon Station.

BruceMcF said...

jim said... "If the chinese annex us maybe they will build us some high speed rail." ... no need for HSR to harvest the natural resources of the US.

Remember that during the heyday of interconnected freight and passenger rail grids in England, and in North America and and in western Europe, the Argentine rail system was developed like tributaries of a river, to bring raw materials to the port city and then onto ship to the countries with the factories, and someone could travel five hundred miles to the capital and five hundred miles back again to get to a city a hundred miles away.

jim said...

Somthing drastic is going to be on the horizon for global economics. I don't know what, be at some point don't you think we will have a universal currency? On the one hand, there are benefits for the powers that be, to having a uniform, and fairly controlled standard of living world wide - on he other hand - there is still an enormous amount of profit to be me from instability.

jim said...

all this talk about china is making me hungry. I love their food, but Im fasting for my cholesterol test. damn. pot stickers mmmmmmm. As much as their government sucks - you have to give them props - they have everybody's money. 750 billion, just for a rail program. makes obamas 8 billion seem kinda sad.

無名 - wu ming said...

as comforting as it may be to paint the chinese as universally poor and backwards, the fact of the matter is that their train system already functions at a higher level than america's on most counts. their massive HSR expansion is just building on that foundation. while there may be some steam trains somewhere way out in the boonies, everywhere i've taken trains in china it has been the usual sturdy diesel-electric hybrids that you get in the states. maintained by the same skilled mechanics as we use. it's a pretty modern country, in most places.

additionally, while there is grinding poverty in china, it is by no means that way across the board. not to get all tom friedman-y (as he is nearly always wrong about everything he writes, and downright mendacious when it comes to the costs of neoliberal globalization), but china does in fact have a huge and growing consumer base, much of it based in part on real estate assets owned by everyday urbanites esp. along the eastern seaboard. while chinese consumption levels are not up to borrow-and-binge american consumers, most chinese urbanites and a surprising number of rural chinese do buy a fair amount of electronics, gadgets, appliances, etc. it's just that they tend to be a lot more wary about going into debt to buy big stuff like cars or housing, in part due to the more recent memories of horrible grinding poverty.

mostly, china's a big place with a lot of extremes and regional inflections, so sweeping statements don't really work as well. it will be interesting to see if it transitions away from the export economy model, although they don't really have the massive trade deficit problem with other parts of the world as much as america. germans and japanese manage to do trade with china just fine. it's our self-inflicted destruction of our own manufacturing sector that distorts that particular trade relation.

OK, i'm officially way OT.

Andy Chow said...

While the living standards in China are nowhere in the same level as in the US, China has come a long way in terms of raising living standards. 30 years ago, the gap in living standards between China and the US was much wider. 30 years ago, US ready got the interstate, and in China too many roads were still unpaved. The human rights situation was much worse back in the 60s and 70s.

While China can build HSR relatively cheap because of differences in property laws and wages, HSR would still provide well-paying jobs and positive impacts in the local context. It is not fair to say that HSR is bad in China because they don't get paid at the same level as in the US, even though they would get paid relatively better than in other jobs available there.

Also, we cannot forget that China's rail system is nationalized at a level equivalent to the cabinet here (not shared with highways and aviation) and self regulates. The rail system here is too fragmented, you have Amtrak, local transit operators, freight companies, FRA, state regulators, etc.

Rob Dawg said...

1,000 passenger 218mph trainsets for $10m per? We should immediately sign a piggyback contract for the 22 we'll need. Lead engine, trailing cabin and 16 passenger units for $10m? Am I reading this right?

40,000 km of railway for $730 billion? That's $18.25 million per km. 1/5th our expected costs.

These are the standards to which CAHSRA needs to aspire.

Spokker said...

If there were no language barrier, I'd rather live in a United States without trains than a China with trains.

Rob Dawg said...

Spokker said...
If there were no language barrier, I'd rather live in a United States without trains than a China with trains.
Even with the language barrier there are 1.2 billion Chinese who agree with you.

Anonymous said...

@ rob dawg

Amazing what you can get done when you don't care if your labor force lives or dies huh?

Plus the chinese really know a thing or two about building railroads...they built the ones we still use in this country today.

You wanna work for 35 cents an hour?

-John

Alon Levy said...

Wu Ming: Germany and Japan both maintain trade deficits with China, just like the US. Their trade surpluses come from maintaining trade surpluses with the rest of Europe in Germany's case, and the US and the rest of East Asia in Japan's case. China really does have a problem with excessive exports.

K.T. said...

kind of off topic,

According to BART's New Rail Car Project, they are planning to spend $1.9 billion (I'm assuming in 2009 $,) to purchase 700 vehicles (roughly $2.7 million per vehicle) in the 15-year timeline.

http://bart.gov/about/projects/cars/timeline.aspx#funding

Its good to replace old vehicles with up-to-date vehicles which should be more energy efficient and possibly more comfortable ride to the passengers. However, the price tag seems little too high to me, especially per vehicle price of new BART is equivalent to the price tag of 500 and 700 series of Japanese Shinkansen (approx. $3 million/vehicle for 500 series and approx. $2.3 million/vehicle for 700 series)

I hope that the pricetag of the CAHSR vehicles would be somewhat equivalent to the pricetag of the high-speed vehicles used in other countries.

Fred Martin said...

Actually, BART's new car contract costs $3.4 billion, and that pricetag could easily go up.

This makes each BART car cost about $5 million each, not $2.7 million. Some say the custom-designed BART cars are some of the most expensive train vehicles in the world, yet there is nothing special about their technology. You can buy a small executive jet for the price of a BART car.

Anonymous said...

China stopped using steam trains in 2005 (though they have limited to a few rural lines for much longer).

Everybody talks about BART needing custom trains because of it's different gauge, but can't they just buy some suburban trains from India? Most railways in India use the same track gauge as BART, though I guess electrification and loading gauge might still be issues.

Fred Martin said...

It's not just the track gauge with the unique BART cars. It's the whole profile of the train and the clearances within the system. Only the squat cars unique to BART can fit in the tube and underpasses of the BART system.

The consultants that designed BART understood that such a unique system limited the number of off-the-shelf components that could be used, thus ensuring lavish profits for the few limited vendors that could compete for BART contracts. This is why everything BART does costs so much and takes so long. The public interest of CHSRA should seek to avoid this fate, but the track record so far gives plenty of reason to worry.

Lijian said...

I am glad American still think democracy is the most important thing over anything else. Good, you are sleep on a sh*tpile infrastructure and still enjoy it by saying "YES, we can!"

Bo said...

@Spokker,
I'd rather live in the U.S. too, but with one caveat: as long as the Chinese keep lending us money to prop up our economy. If the Chinese decide to pull the plug, I'd rather be somewhere else. I can't and don't want to imagine what social unrest here will look like with millions of bible-waving, gun-totting dumbsh!ts running amok. Come to think of it, it's downright embarrassing to be in hock to China. Aren't we supposed to be good at this capitalism thing? I thought democracy is like having cruise-control: once you have it, success, happiness, moral superiority, and bragging rights are automatically guaranteed. I never thought work, sacrifice, and being responsible were necessary to keep the good times going... Oh well.