Why President Obama should look to China on what not to do when it comes to U.S. high-speed rail projects

The Obama Administration’s proposed FY2013 budget has earmarked $47 billion for passenger rail projects as part of a six-year transportation program. High-speed rail projects are moving forward in California, Pennsylvania and Washington State while regional high-speed rail associations are moving their plans forward in the Midwest, Southwest and even along Atlantic coast.

It’s time for a realty check, and probably nowhere is there a better place to start than the nation that has taken high-speed passenger rail the furthest – China.

Building on the foundation of conventional trains, China’s annual spending on tracks and other related projects tripled between 2007 and 2010 as it rushed to build the world’s most extensive network of high-speed trains. Borrowing rose from 77.1 billion to 1.7 trillion yuan to support this spending frenzy. High-speed rails now make up 8,358 km of the nation’s 91,000 km of rail lines. Moreover, contrary to reports of a halt in its system’s expansion, China still plans to build another 17,000 km, boosting high-speed rail’s share of all rail lines to almost one-quarter of the nation’s system.

Under any circumstances, keeping track of spending on this scale would be a challenge, and the ministry has been criticized within China for its opaque accounting practices and lack of transparency in contracts.

So, what are the real lessons, if any, for the United States?

First, pinning national hopes on large-scale public works projects threatens efficiency and strains project delivery. The high political profile puts pressure on contractors and agency administrators to cut corners to achieve politically determined benchmarks. This inevitably increases the risks of human error with potentially devastating and tragic results. A case in point is China’s high-speed rail disaster near Wenzhou last July that killed 40 and injured 200. The issue exposed the full scale of China’s rail program and thrust its weaknesses embarrassingly onto an international stage. While the failure of software technology was the proximate cause of China’s rail disaster, the real problem was human error. Dispatchers had the information they needed but failed to recognize the danger and slow the trains down.

Complex, one-of-a-kind systems carry inherent risks in adopting, applying and implementing new technologies. As in many cases of catastrophic failure (e.g., airplane collisions and crashes), a human element was also in play, and the potential for error was compounded exponentially by the politically driven pace of deploying the world’s largest, fastest, and most extensive rail network.

Second, China’s enthusiasm for high-speed rail and the national pride it engendered outpaced the ability of its engineers to adapt technology safely and efficiently. China began to adapt technology to the particulars of the Chinese system through joint partnerships with experienced foreign firms in 2004. As glitches became apparent (none of which appeared significant at the time), the government moved the goal posts to achieve even more ambitious objectives, according to extensive investigative reporting by the Chinese business magazine Caixin. Instead of 200 kph trains, the trains were expected to achieve speeds of 250 kph, then 300 kph. Technology never really caught up, a factor compounded by the uniqueness and vastness of the Chinese system.

Third, programs that grow quickly involve vast sums of money and lack accountability and transparency, which breeds corruption. The Beijing-Shanghai high-speed rail route alone nearly doubled in cost as expenses grew from an estimated 12.3 billion yuan to over 21 billion yuan. Many Chinese officials have been fired or removed from key positions, including the Minister of Railways and the chairman of a major logistics company, because of corruption that may have led to billions of dollars of waste. Obtaining lucrative construction contracts during the early 2000s appeared to be more about connections than the quality of work (and cost), and “middlemen” were handsomely rewarded for “mediating” services.

These lessons are all important for rail visionaries in the U.S., aside from whether the economics of high-speed rail makes sense and can ever operate as a real business enterprise. China is stepping back and taking a breather in an admirable effort to take stock of the implementation failures that have thrown their entire national high-speed rail network in jeopardy. With cost overruns and concerns about fraudulent forecasts and financial accounting plaguing advanced projects in the U.S., including the California project, these lessons are all too real and important on this side of the big pond as well.

Samuel R. Staley, Ph.D. is a senior research fellow at Reason Foundation. This article is based in part on a longer article appearing in the National Review (December 2011).

Samuel R. Staley, Ph.D. is a senior research fellow at Reason Foundation and managing director of the DeVoe L. Moore Center at Florida State University in Tallahassee where he teaches graduate and undergraduate courses in urban planning, regulation, and urban economics. Prior to joining Florida State, Staley was director of urban growth and land-use policy for Reason Foundation where he helped establish its urban policy program in 1997.