Half of the Hangzhou-Shaoxing-Taizhou high-speed railway is owned by a consortium of non-state investors led by the conglomerate Fosun. China Railway retains control of operations.
Photo from CFP
By TANG Jun
The Hangzhou-Shaoxing-Taizhou railway that cost 45-billion-yuan (US$7.5 billion), the first in China owned by private capital, opened on January 8. The 266-kilometer line with a maximum speed of 350 kilometers per hour is important in marketizing the state railway system.
A consortium of non-state investors owns 51 percent of the railway, led by Fosun with 27 percent. The other half is owned by government investment funds.
FANG Jianhong, CEO of Fosun Infrastructure Industry Development Group told Jiemian News that there was no precedent to follow in how the consortium was organized and funded, but the new railway will be run by the state via China Railway, fully controlled by the Ministry of Finance.
In the initial proposal, the consortium was to have a say in daily operations, but the idea was abandoned because the rest of the network would be run by China Railway. In this sense, Hangzhou-Shaoxing-Taizhou is not dissimilar to other lines partly funded by private companies. Fang said the innovation lies in funding, with the consortium paid through the profits of the line, including tickets, permits, and advertising.
It is unlikely that backers will recover their investment given that almost all high-speed railways in China lose money. The most notable exception is the Beijing-Shanghai route, which remained highly profitable even during the pandemic last in 2020. The new railway connects several cities not previously on the train line and will boost logistics, real estate, and tech, where Fosun has sizeable investments.
“Eventually, as the economy grows, it will translate to higher ticket sales,” Fang said, but not everyone agrees.
ZHAO Jian, professor of economics at Beijing Jiaotong University, said there are already direct routes from Hangzhou to Taizhou. The trip takes 100 minutes and requires a change in Ningbo. Zhao reckons that regional and commuter lines might be a better starting point for marketizing the system. They are separate from the high-speed network, giving private shareholders more leeway. Last year, Guangzhou Metro (state-owned) took over two regional train lines, becoming the first independent entity to operate train lines.
The Hangzhou-Shaoxing-Taizhou railway is part of the government’s attempt to introduce mixed-ownership to industries previously monopolized by the state. Price controls for high-speed rail tickets have been removed. A heatedly debated issue is whether to open train operations to non-state players while keeping the network itself under the control of China Railway.