News Desk
China’s ambitious high-speed rail network, once hailed as a symbol of the country’s economic prowess, is now under growing financial strain. With debt surpassing $1 trillion and ridership failing to meet expectations, concerns are mounting over the sustainability of the vast infrastructure project. What was once a grand vision of connectivity is now seen by some as an expensive liability that is struggling to justify its costs.
China State Railway Group (CSRG), the operator of the network, has acknowledged that its debt-to-asset ratio remains at 63.8 percent—well above the 50 percent threshold typically considered financially healthy.
The government has set a goal of expanding the network to 70,000 kilometers by 2035, but analysts warn that reckless expansion and declining revenues could turn the project into a long-term financial burden. Some experts argue that the push for expansion is more about political prestige than economic necessity, particularly as many new lines are being built in areas with low population density and limited demand.
Zhao Jian, a scholar at Beijing Jiaotong University, raised concerns as early as 2019 about the financial risks of overbuilding high-speed rail in sparsely populated areas. “Having the world’s largest high-speed rail network with low transportation density is indicative of significant financial risk,” he said. His warnings have largely been ignored as China continues its infrastructure-heavy economic model, despite clear signs that the current approach may not be sustainable.
Local governments, which co-fund many rail projects, had initially counted on land sales to offset the costs. The idea was that high-speed rail would drive up property values and create a new source of revenue. However, China’s real estate downturn has undercut this strategy, leaving many governments burdened with debt and unfinished projects. Instead of generating wealth, many of these projects have stalled, creating additional financial pressure on both the state and local governments. Some rail lines have been suspended mid-construction, further complicating financial woes and leaving cities with half-finished stations and railbeds leading to nowhere.
While routes between major cities generate profits, many lines in less populated areas operate at a loss, contributing to local debt. The Virginia-based Alliance for Innovation and Infrastructure noted that China’s high-speed rail network is the largest in the world but often runs below capacity. Reports indicate that trains in rural regions often run nearly empty, raising questions about the financial sustainability of such an expansive network.
The challenges are exacerbated by broader economic headwinds, including a slowing economy and demographic shifts. China’s declining birth rate and aging population mean that future ridership may shrink even further. Wall Street Journal correspondent Brian Spegele pointed out that China’s population is projected to shrink by 200 million over the next three decades, raising serious doubts about the long-term need for extensive rail expansion.
Desmond Shum, a Hong Kong-based businessman and author, argued that the rail boom was largely driven by an infrastructure-heavy economic model that is now faltering. “Now, as the bubble deflates, the trains keep running—but the bill is coming due,” he said.
Adding to the concerns, the high-speed rail network requires extensive and costly maintenance, which further increases the financial burden. Economist Davy Huang noted that even though many trains run below capacity, maintenance costs remain high, making it difficult for the network to break even. He pointed out that China’s insistence on pushing ahead with expensive infrastructure projects, despite an economic slowdown and declining demand, is a risky gamble that could exacerbate financial instability in the coming years.
With real estate no longer providing the financial cushion it once did, and local government debts piling up, China’s high-speed rail expansion is at a crossroads. The question remains: will the government scale back its ambitious plans, or will it continue pushing forward despite the growing costs? For now, the trains continue running, but the financial strain is becoming increasingly difficult to ignore.
