High Speed Rail Flops…in China?

Last week’s news of blistering economic growth in China (11.9% for the first quarter 2010) overshadowed this tidbit gleaned from the tail end of a report in The New York Times (emphasis added):

“Lending by Chinese banks fell 43 percent in the first quarter from a year earlier as the government tightened credit controls while trying to wind down its stimulus.

“Also helping to cool cool inflation, prices for farm produce have fallen for seven weeks, suggesting food costs would ease.

“Regulators have renewed efforts to assess risks from loans and each day brings fresh reports of projects found to be unprofitable or ill-conceived.

“A high-speed rail service from Beijing to southeastern China’s Fujian province was shut down after just two months because passengers shunned it in favor of cheaper air fares.”

The conventional wisdom gives China an advantage in high-speed rail. But, as competition increases among domestic air carriers and economic growth builds a larger middle-class, the Chinese seem to also prefer the advantages of the increased mobility and lower travel times afforded by intercity air travel.

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.