Summary of Key Points
This article highlights that China's transportation infrastructure (highways, railways, aviation, urban buses, and subways) is among the largest in the world. However, there is a widespread overcapacity in terms of both the total volume and structure of these systems. This means that despite the extensive construction of new roads and transportation networks, the actual demand for transportation services (passengers and goods) is declining, leading to significant debt burdens. The main reasons for this situation are as follows: local governments are driven by the notion that building roads will lead to economic prosperity and by the pressure to meet GDP growth targets, while ignoring factors such as population migration and changing demand patterns. Potential solutions include adjusting infrastructure plans based on population movements, implementing market-based pricing mechanisms, providing targeted subsidies, and holding accountable inefficient investments.
1. High-Speed Railways: The longest in the world, but with declining utilization rates
- Extensive network: By 2025, China's total high-speed railway mileage will reach 199,400 kilometers, nearly twice that of the United States. The high-speed railway network in Guizhou (9,563 kilometers) is nearly on par with that of Japan, despite Guizhou's GDP being only 1/13.4 of Japan's.
- Low usage: Provinces with longer high-speed railway networks have lower freight transportation volumes. For example, Guizhou transports 3.93 billion tons of goods per kilometer per year, compared to 125.9 billion tons in Guangdong. The five provinces with the fastest growth in high-speed railway mileage (Tibet, Yunnan, etc.) have seen a 8.48% increase in freight demand, while regions with slower development (such as Shanghai and Zhejiang) have seen a faster increase in freight demand.
- Debt burden: In 2021, the revenue from toll roads nationwide was 663.1 billion yuan, but the expenditure reached 1.29 trillion yuan, resulting in a deficit of 627.9 billion yuan. The interest costs alone accounted for 82% of the total expenditure.
2. Railways (including high-speed railways): The longest in the world, but with declining passenger and freight capacity
- Dominant role in freight transport: China's railways, especially high-speed railways, play a crucial role in transporting resources from resource-rich regions like Xinjiang and Tibet. However, freight demand in many eastern regions is declining. The average transportation distance has decreased from 825 kilometers in 2017 to 693 kilometers in 2024, indicating a reduction in long-distance transportation needs.
- High debt levels: The total debt of China State Railway Group is 6.17 trillion yuan, of which 5 trillion yuan is for interest payments. With a decreasing population and reduced mobility in the future, the debt repayment pressure will increase.
3. Aviation and urban transportation: Underutilized resources
- High-speed railways competing with aviation: In 2024, high-speed railways carried 4.5 times more passengers than civil aviation. For example, the passenger volume at one airport's Terminal 1 decreased from over 10 million in 2019 to 8.03 million in 2024 due to the opening of new high-speed lines, while Terminal 2 was built with a capacity of 23 million passengers but is now being converted into office space, resulting in waste.
- Uneven distribution of airports: Among the 270 airports in China, 41 large airports handle 83.7% of the total passenger traffic, while the remaining 191 small airports (with annual passenger volumes of less than 2 million) account for only 5.9% of the total traffic, and most of them are operating at a loss.
4. Urban buses and subways: Substantially reduced passenger volumes and high financial subsidies
- Low usage of buses: By 2025, the annual passenger volume per bus is only 33% of what it was in 2010, and the passenger volume per kilometer of the bus network is 16% of the original level. For example, in Shanghai's Lujiazui area, an average bus carries only 1.5 passengers during the day.
- Inadequate subway capacity: Of the 41 cities with subways, only 15 meet the standard of carrying 0.7 million passengers per kilometer per day. The construction cost of subways is high (1-2 billion yuan per kilometer), and the maintenance costs are also substantial (10-15 million yuan per kilometer per year). In 2024, Beijing spent 24.8 billion yuan on subway subsidies, and cities like Qingdao and Chengdu also allocated over 7 billion yuan for subway maintenance.
5. Why continue building despite overcapacity?
There are three main factors driving this situation:
1. Inertia of the "build roads for prosperity" mindset: People believe that building roads is essential for economic growth, but in reality, the opening of high-speed railways has led to a net outflow of population from smaller cities to larger ones, failing to generate the expected economic benefits.
2. Short-term GDP incentives: Investing in infrastructure can rapidly boost GDP, and local governments are willing to invest despite low returns in order to achieve short-term political achievements. The growth rate of government debt in the past five years has been more than three times the actual GDP growth rate.
3. Misaligned performance evaluations: Some officials treat infrastructure projects as symbolic undertakings, ignoring the realities of population migration and declining local industries, resulting in accumulating debt.
6. Solutions to the problem
To address these issues, the following four approaches are recommended:
1. Replan infrastructure based on population trends: Future population growth will concentrate in major cities such as those in the Yangtze River Delta and Pearl River Delta regions. The state should lead the adjustment of infrastructure plans, allowing investment in areas with population inflows and restricting investment in remote areas with population outflows. Transfer payments should be aligned with population movements to avoid waste.
2. Implement market-based pricing: Prices for high-speed railways and subways should be adjusted according to supply and demand (e.g., increasing prices during peak hours in busy areas). Subsidies for buses and subways should be targeted at vulnerable groups (the elderly, the disabled, and low-income individuals) to reduce financial burdens.
3. Optimize existing infrastructure: Reduce or discontinue services on less-used routes, and consider privatizing some operations. For highways and high-speed railways, consider expanding and renovating existing facilities while carefully evaluating the cost-benefit ratio of such investments.
4. Hold accountable inefficient investments: Hold local governments accountable for infrastructure projects that do not meet expected usage levels. When evaluating their performance, consider indicators such as debt levels and infrastructure utilization rates to discourage reckless investment.
In summary, China's transportation infrastructure is large but not efficient. The overcapacity problem reflects misaligned political priorities and development models. Moving forward, the focus should shift from emphasizing scale to focusing on efficiency, ensuring that infrastructure truly serves the real needs of the population and the economy.