China Rail revolution is speeding toward a US$1 trillion black hole

China Rail revolution is speeding toward a US$1 trillion black hole

Rail revolution becomes a ‘money pit’ as debt soars for one of Beijing’s most prestigious projects

China’s space-age-style rail revolution has become a symbol of state power. Beijing considers the 30,000-mile, or more than 48,000-kilometer, high-speed network one of the great modern wonders of the world as it crisscrosses the country.

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But beneath the tracks lies a darker secret. A US$1 trillion black hole of debt has opened up, threatening the very existence of the transport heavyweight China Railway Corporation. As The Wall Street Journal cautioned last week, it has become a “giant money pit.”

Yet the warning signals have been flashing red for years. “Having the world’s largest high-speed rail network with a low transportation density is indicative of significant financial risk,” the Beijing-based Caixin media group reported in 2019.

“The ongoing construction of such a large high-speed network may place a greater debt burden on China Railway Corp [which runs the network] and local governments, making it a “gray rhino” or obvious threat to the Chinese economy,” Caixin stressed.