Thursday, July 28, 2011

China's economic miracle may be about to come off the rails

Largely invisible on a radar screen dominated by concerns over the US and eurozone debt crises, the Chinese economic miracle, one of the few apparent bright spots that remains in a world beset by trouble, has in recent weeks also been showing unnerving signs of strain. Indeed, it may even be about to come off the rails entirely – quite literally.

Last weekend, one of China's new bullet trains, a showcase of the country's growing economic prowess, rammed into the back of another, killing 39 passengers and injuring nearly 200 more.

The accident has raised questions, not just about the safety of China's vaunting ambition in high-speed rail, but about the sustainability of the country's break-neck pace of economic development in the round.

As Shen Minggao, chief China economist at Citi, has observed: "High-speed rail in some sense represents China's fast growth. When you care so much about speed, you sometimes pay less attention to the quality of the growth."

China's political leadership has long dreamt of an entirely new rail network, from the prosperous eastern seaboard to remotest inland China, and over the past four years they've set about building it with a determination which no other country would seem remotely capable of.

But in so doing, they appear to have put speed before safety, and economic ambition before commercial viability. It is not just the quality of the bastardised foreign designs, copied and botched together to feed China's insatiable appetite for growth, which is now being questioned. (more)