The Myth of Chinese Efficiency

Audio editing by Eric Schneider
Motion graphics by Vincent de Langen
Thumbnail by Simon Buckmaster
Writing & Direction by Evan

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[samsonsoturian]

To add: The most profitable high-speed rail is in Japan. This is because they have a high GDP per capita, and are one of the most densely populated places in the world. So much so that it is often faster to walk 6 miles than to drive. The perfect place for a HSR.

[guatemalantomcat]

It always cracks me up to hear that this could've all been avoided if only the country's leader had subscribed to Skillshare

[BrutusAlbion]

Every time I hear about a public infrastructure project, it's always the same story; the project went 2x to 3x over budget. Let's be honest here at this point. We're all getting scammed by these construction companies who are underbidding and expecting us to pay the bills later. At this point, a construction company should be forced to fork over the remaining lacking funds if it made an improper bid or be banned from making public bids in the future if it underbids to get the project. There were probably some honest construction companies out there that were considered 'too expensive' because they tried to calculate the ACTUAL cost and didn't get the bid because some schmuck underbid but doesn't need to pay a dime. This is ridiculous. This needs to be held accountable.

[EDIT] After reading some of the comments I realize this is as much of a government problem itself as it is a construction company related issue. The government is ignorantly lowballing to get public support and the construction agencies in charge of this are just as willing to play ball in this ridiculous game of scam the tax payer into paying for infrastructure programs that we all know are going to be 2 or 3 times as expensive as advertised. When it happens occasionally, we can all excuse it, when it has become a consistent pattern, it is fraudulent in my opinion. The government officials who signed off on this equally deserve to be held accountable and threatened with corruption and malicious intent.

[saumyacow]

As an Engineer and high speed rail proponent here in Australia I find myself both agreeing with this video in parts, but also annoyed at some of its generalisations. The World Bank report you cite shows construction costs a fraction of what you would expect in Europe or here in Australia, given that we are talking about lines that are primarily on viaduct or in tunnel. The reason for this cost efficiency is economy of scale, automation and simple, repeatable design elements. So, contrary to the video, lines on viaducts aren't necessarily more expensive.

The video also dismisses wider social and economic benefit. That's hard to measure of course, but its the measure by which long life transport infrastructure should be judged. It makes no sense for a private company to borrow money and then expect to recoup capital costs from fares. It makes a lot of sense for a government to invest in something that will pay for itself in terms of wider social and economic benefits over decades. It is in fact the same story as roads. Except that for a similar sized bucket of cash, high speed rail will move more people, faster than a road of the same length.

You've also incorrectly characterised journeys of under 100 miles as suitable only for cars. This is in fact wrong, and you can find good examples of far shorter trips in for instance the Shinkansen network. A lot of high speed rail stations are "parkway" stations or otherwise not well connected to the wider public transport network. This is a mistake. But it is misleading to suggest that high speed rail stations in general must be inconveniently located. Take a look at HS1 and now HS2 in England for an example of getting it right.

You're also drawing a long bow blaming neglect of conventional rail lines in China on money spent on high speed rail. This is certainly not the case in the US where the freight network is quite profitable and in most cases is well kept. In Australia the conventional rail network (which is essentially a freight network outside of cities) is marginal (and in places, poor). This cannot be blamed on high speed rail because we don't have it.

Another thing you're missing (and it shows in your incorrect assessment of at what distance high speed rail can compete with cars) is the extent to which high speed rail can take passenger vehicles off major intercity roads. In Australia there are several major intercity corridors (notably Newcastle to Sydney) in which we've spent tens of billions of dollars (todays dollars) on modern, motorway standard roads. Which are now congested. The price of not building high speed rail in these corridors is that we will spend further tens of billions on augmenting these roads.

Just like with conventional commuter rail, the thing you have to ask is not what the rail network cost, but rather what would it cost (and how dysfunctional and unworkable a city would be) if we didn't have that infrastructure.

Oh and one other thing. The paradigm in which all you're concerned with is internal rate of return (a private company borrows money and therefore has to pay for it in fares) quickly leads to a death spiral - you're charging too much for fares and therefore people choose the alternative. This happens over and over and you've correctly pointed it out happening in China. It occurs because of the belief that high speed rail must pay for its capital out of fares. No, it should not. Instead we should be investing in it as basic infrastructure in order to seek the return of wider social and economic benefit for the nation as a whole. You know, Australia invested beyond $100 billion (in todays dollars) in its interstate highway network. There was no business case (as we know it today). There was no expectation of a "profit". We did it because we wouldn't be a modern, functional nation without a transport network. We need to stop being so schizophrenic in our attitude to high speed rail.

Oh and btw, your discussion of energy cost is right, and wrong. Yes, energy use does go up non linearly with speed. But under most reasonable passenger load scenarios, the electricity cost is a small fraction of the fare revenue and a small fraction of the overall operational cost - that cost is mostly dominated by maintenance, staff and back office costs. Of course, if there's hardly anyone on the train then you've got a point.

Btw I'm not defending China's decisions to build lines into increasingly silly places. A lot of this isn't about economics. its more about geopolitics and internal control. However, when you have nearly ten million people along a corridor that's 200 kilometres long (as we do here in Australia between Newcastle and Wollongong) then you do have a situation where the wider social and economic benefit is worth it and you will save tens of billions on future road costs.

[paulsansonetti]

infrastructure is one of the few things actually worth going in debt for

and the idea that people can work in cities and live in much cheaper areas, and not spend half their free time commuting is a huge boon to humanity

[userxspldy]

They must have known HSR going to Tibet, Xinjiang, and other remote parts of the country were fundamentally unprofitable. I think the idea is to better integrate these regions into the wealthier Chinese eastern seaboard to promote social stability and potentially have these places serve as future launchpads for the Belt and Road Initiative.

[samsonsoturian]

Raising the price of a ticket doesn't help them, either. That simply reduces ride numbers. So most rails will raise the cost of freight to the point it is often cheaper to move by truck than by train. This contributed to their fuel shortages a few months ago, as the ability to move coal across country was limited.

[rushtestecho]

Why do we still judge public works by profitability? It's moronic thinking that has CRIPPLED our ability to have large scale infrastructure projects happen around the world. Roads aren't profitable. Hydroelectric dams aren't profitable. Airports aren't profitable. And if any of those are, they're doing so as a secondary benefit. The primary purpose is to provide economic impact mixed with improved general welfare.

The world would be in a much, much better place if they got out of the horrible mentality of assuming that public works projects need to generate returns on investment in dollars. They generate returns in terms of access to work, reduced traffic, economic development around the train lines, and a bunch of other intangibles.

[Iamwolf]

This just goes to show you that transportation isn't a one-size-fits-all sorts of affair. Each method has its own unique strengths and weaknesses, and HSR is no exception.

[asdf]

Even though I agree and think most in China would agree that there might be some negative impacts from high speed rail in the future. At least where I live (Yangze River Delta) it has been a blessing for many. Lots of people here live in smaller cheaper cities while taking the bullet trains off to Shanghai every day commuting (for the higher wages while paying a fraction of living costs). During weekends I often travel between cities many times a day to play and have fun. It's blurred the boundaries between cities to the point where I feel the entire greater region of the Yangze river delta is just one single megacity. And even though it may be a bad economic gamble, it's one of the things in life that I wouldn't ever want to see disappear.

[kko]

I did 25 hour long journey between Shanghai and Guangzhou as the fast train was sold out. There were no empty seats at the train so I had to stand for most of the trip. The first thing I did when I came to Guangzhou, I bought ticked for the fast train back to Shanghai. I would pay not 100$ more for the fast train, but 500$ more at that moment. 😄

[BigBenLB]

I live in Hong Kong, I’m 192cm so I struggle to fit in economy seats on Chinese airlines. Given the choice I would always take the high speed train if it was viable. They have a LOT more legroom in even the second class seats, are fast, quiet and comfortable. Even took the 2, 000km ride from Beijing to Shenzhen once. It took around 9 hours but it was one of the most relaxing journeys I’ve ever experienced

[XOPOIIIO]

Being a middle-income country is an advantage. It's actually the strategy Chinese government use: Build as much infrastructure as possible while workforce is still cheap. So in the future you would only require to spend for maintenance.

[linshuli]

There is a missing point. The reason many local governments building more than necessary high speed rails is that the land price near those stations sky rocketed. They can more than cover the cost by selling inflated land (this is another problem by itself). Freight rails does not promote land price, therefore slow/freight rails were under-invested compared to previous 5 year plan by central government, while high speed rails were over built. I live in Shanghai and prefer high speed train much better than air travling beacuse they almost never delay, and the stations are usually near city center.

[jaywang]

PolyMatter, as a person living in a Western country outside of China but regularly visits, there are some things that I agree with in this video, but I have a vastly different view from what was presented. I would like to counterargue that the Chinese government, while not entirely clear or definitive, have some sort of vague grand plan for the next 10 years of the future development of the country. HSR is just one of them.

DISCLAIMER: I am not a subject matter expert so please do take my opinion with a grain of salt.

First and foremost, the construction of the highspeed rail was birthed due to two significant issues that affected China at the time. The first was the 2008 financial crisis which saw many economic sectors take a huge hit and its general economy, which was entwined with that of the US, saw its own market spiral into an almost uncontrollable situation. To salvage this, the Chinese government took a page out of the US and decided to invest in infrastructure. Similar to the infrastructure boom during the great depression in the US, the economy was able to keep its head above the proverbial water and function as normal (of course with some visible slowing down but overall, it was alright). As for what infrastructure to build that was yet to be decided.

The second problem which developed HSR was the economic disparity between cities. As shown in the video, the eastern coastal cities had the most economic prosperity while inland cities barely had any significant economic activities. Furthermore, due to the economic disparity, salary and wages between the two cities will differ widely (think Silicon Valley wage and some random Midwest city wage). This had the adverse effect of attracting people to move into major coastal cities. Originally it was not a bad thing as it can create mini–Silicon Valleys like ShenZhen HOWEVER this also caused a brain drain of the inland cities. The talents will leave their inland city to pursue a better career at a coastal city and the inland city will not see any benefit or return as their talented people all left.

This also caused the inland cities to have slowed economic prosperity and output as well as innovation. HENCE the problems combined caused the Chinese government to construct HSR (there are still other factors which would be discussed later).

I should mention at this point that I agree with the fact that the Chinese government does pursue many constructions out of vanity to use as propaganda, but HSR is not one of them in my opinion. Allow me to explain. The video mentioned that the HSR infrastructure lacks wealthy passengers to make it profitable, which is while true, is not the main aim of the HSR in my opinion. The HSR connects poorer rural minor cities in-between major cities to a proper infrastructure line which allows for those towns to prosper as well. This is due to the creating of maintenance and operational jobs within the area which ripples throughout the community and slowly become more prosperous (this point can be disputed as not all minor cities has seen growth).


The next point I would like to tackle is the stimulus in transport and power infrastructure. The video says that it was a gamble that did not pay off. I would argue the opposite. The demand does materialise but materialises slowly. One thing the Chinese government has to leverage is its ability to create economic growth. This has been true especially looking at the GPD of China itself. The citizens are all happy to know that they will earn more over time and their children even more so. Hence, it is more of a generational thing, and it is an early investment. Like most early infrastructural investments, it will be at a loss until decades later (e.g. Hoover Dam). You cannot place profitability so early into its investment lifespan yet (will be discussed again). Also considering the huge population difference between China and the rest of the world excluding India, China is more than 4x the population of the US. Imagine transporting that many people per year, its infrastructure cost would be insanely expensive in the short term but will be beneficial in the long run.

The next point the video raises is the ticket pricing and overall cost/efficiency. As mentioned above, the HSR connects minor cities to major ones. It allows investors to invest and develop minor cities over time. The current cost is not too expensive, because once again, people who use HSR are more likely to come from a major city and travelling to a minor city OR another major city (rather than minor to major city). This means that the minor cities will develop overtime and will become major cities one day, justifying the cost of the HSR. Efficiency wise I cannot say because I am not knowledgeable enough in that field, however from what I do know is that the comparison of efficiency as input versus output is a bad misrepresentation of the HSR. While many lines do not carry many passengers at all, it serves as a connection first.

E.g. Connecting the Central station with some suburb 30km or further away. While it is not "efficient" or easy to justify the cost for the low profitability, it is still a great benefit for the people living there as they have a quick access to the CBD when needed. Think of the HSR as a more national scale version of this. Yes, it is not very profitable however, it is a godsend when needed.

Slow trains are argued to be the main contender of HSR which I would say to be both true and false at the same time. Leisure travelling is one of the biggest uses of HSR and slow train but each has their own advantage. Slow trains offer a cheaper alternative BUT the price shown in the video refers to economy class (or the crap seats). Sometimes can become uncomfortable for middle class people over long distance. Slow trains also come in a variety of models, some with air cons some without, some with open windows, some without. Cramped seats etc, you can imagine. Imagine sitting in a subway line for an entire day to reach that destination (not wonderfully comfortable I can tell you that). The price difference also includes comfort as well as time compared to slow trains. This is because even the cheapest seats on the HSR are much more comfortable and arrives much quicker (a win-win if you ask me). Slow trains have a different purpose compared to HSR. HSR connects major cities and the ones in between HOWEVER slow trains serve as a rural connection overall. HSR would be more like a highway between two big cities and exits to smaller town that lies in between, but the slow trains are the streets that connects the more distant suburbs and towns to the highway in the first place. Yes, the Slow Trains serve a lot of passengers but once you factor in the economic line, the majority of people who ride the slow train are low-income earners and even now, slow trains are being phased out over time as nearby cities experience growth (not to discredit the need for slow trains).

I do agree with that HSR has overshadowed the cargo trains but interestingly enough, cargo trains have not experienced a reduction in demand. It has maintained the same levels as before and overall, still functioning as before (to my knowledge at least).

Last but not least, HSR would seem pretty useless if all the above is not considered or has taken a hit. HOWEVER it also has incredible strategic use. It can send supplies extremely fast to disaster stricken areas and quickly replenish compared to airplanes. HSR only needs a station to accommodate the train and a huge airfield and control tower is not needed. Furthermore, it is very reliable. HSR can run in almost any weather whereas airplanes cannot fly if there are any bad weather (stormy, blizzard, etc). Trains will get the job done. Also, to be on the dystopian side a bit, consider that an uprising or protest (cough HK cough* please don't arrest me xi) happens, planes + HSR can quickly deploy personnel to "control" the situation. Just sayin'.

TLDR;
The video does not go into depth as to why it is inefficient or NOT part of a future vision plan and jumps into conclusion that HSR is a failed gamble based on vanity. HSR is not a failure and is a long-term investment for the infrastructure of the country. While it does have some downsides, its overall benefits vastly outweigh the slight downsides. Cost wise and efficiency wise, it is more than reasonable.

Thank you for coming to my TED Talk.

EDIT: The first comment bring up some good points and I answered it in the replies somewhere

[darrishawks]

It is not true that China hasn’t found a way to do it cheaper and faster. It isn’t just lower cost of labor, it’s that standardization allows for that automated thing they use to lay the next section of rail.

[shesh]

"Politicians think only one election ahead", the harshest truth of most democratic countries.

[thetrainhopper]

And in California we insisted on upgrading miles of existing rail to connect a bunch of cities instead of building a new right of way avoiding thses cities for a fraction of the cost. This includes running over Tehachapi Pass which is out of the way. Not to mention the consultants ate all the money and California refusing to override local government when it comes to literally anything. And it can do this. It could just end Caltrain's existence with one act in the legislature.

[valerievankerckhove]

Inflation. Everybody forgets inflation. Inflation is pretty damn high in China. Inflation means that if China waits too long, land prices would have doubled, salaries would have tripled (and Chinese will no longer want to do the hard work) and legal headaches would have quadrupled (see U.S).

On the other hand, inflation means they can one day triple the ticket prices. Don't believe me? I've lived to see public transport ticket prices in Beijing go from 0.1 RMB to 2 RMB. I thought the x20 increase was highway robbery at first until I realized it's still really damn cheap. A hundred years from now the ticket prices can increase by x10 and nobody would bat an eyelash, and the initial investment would look like pocket change.

Since you're not on the ground, you also don't see how the transportation infrastructure in China has completely changed some industries. China's domestic tourism is now around half a trillion dollars, and the government has started pushing rural tourism, which for now is still in its infancy in China but is set to really take off (judging from the popularity of rural social media celebrities like Li Ziqi for example).

Also, I have No idea what's going on with logistics in China, but my mom in Beijing can order fresh fruit from Xinjiang or fresh oysters from Southern China and it arrives the next day at the latest. There's an app called Pinduoduo which has changed the way commerce is conducted in China, cutting out intermediaries and enabling people in villages to directly buy/sell to each other and to cities. Unlike most e-commerce sites, Pinduoduo has a focus on groceries and daily necessities. It can't work without China's ultra-fast logistics because everything would otherwise spoil on the way.

[WanneSomeSoup]

Great video! But I would argue, there are just more real-world concerns than simple numbers. I'm no expert in this realm but I will list a few of the concerns I can think of as an average Chinese:
1. Economic concerns. Investment is good for business. From 2008 to 2015, the government needed to invest huge to support the economy. HSR is simply the most logical option back then. Where did all those money go? To contractors, workers, and people who lived next to the lines (and a few corrupted officials, ofc). So the money is no wasted.
2. Public service concerns. The train is almost never designed to be profitable, as you said in the video. It's a public service, which means you can't look just at the balance sheet and say "hey, It's not making money. This is a bad idea.". Take Beijing's subway as an example. Those trains transport millions of people every single day, and it is also losing money every single day. As long as the benefit it brings to the entire society is greater than the cost, then its existence is justified.
3. Equality concerns. One of the major reasons why so many non-profitable lines were built is that these lines are connecting relatively poor cities. As you may know, China has huge income inequality. The rich cities are super rich, and the poor cities are super poor. The plan is to interconnect all these cities so that economic development can be transferred and shared by the whole country, instead of by a few leading cities. This plan will take decades to manifest, so it's too early to say "oh man this isn't working".
4. Political concerns. The line to Xinjiang you mentioned is the most obvious example. Nobody ever expects it to be profitable. The whole purpose of that line is to bring that distant and rebellious province closer to the rest of the country. If everything goes well, the connections will bring trust and prosperity. If everything goes sour, the line can still be a way to insert dominance.