China's massive, ongoing building of high-speed railways, urban subways and expressways represents a huge financial risk in which paying back the debts is problematic, a recent report from the Chinese Academy of Sciences warns.

The "great leap," used mainly by local and provincial governments to boost economic growth, will see consequences as the pressures of loan repayments mount after 2015, when most of the construction work is done.

Further, road conditions - especially in rural areas - remain poor and resources are wasted, the report said.

"The transport planning and adjustment should be more cautious and done through scientific appraisals," Lu Dadao, a member of the academy, was quoted by the Beijing News as saying yesterday.

Lu said transport-related spending as a percentage of the gross domestic product is too high and must be cut. The report suggested that transport investment be limited to 3-4 percent of GDP, not the 9 percent spent in 2010.

The report, produced by the Institute of Geographic Sciences and Natural Resources Research of the academy, said the Ministry of Railways' total debts amounted to 1.5 trillion yuan (US$238 billion) by the end of 2009.

Like the rail projects, expressway builders have borrowed from banks, and the loans may go bad.

"After all, the money in the banks is from each and every ordinary resident," said Lu.

Once rail and expressway projects were completed, traffic volume was often lower than projected - especially for projects located in central and west China - resulting in difficulty making operating budgets.

"It's a huge waste," said Liu Weidong, a researcher with the institute.

He noted that there are now 74,000 kilometers of expressways, seven times the amount in 1998, while the demand lags behind despite booming urban and rural development.

The sudden slowing of railway construction after a fatal train crash last year in Zhejiang Province also brought losses, reflecting the problems of over-expansion, Lu said.

The report was released as China slows down the building of its high-speed railway network, mainly due to financing difficulties. The railway ministry has earmarked 400 billion yuan for railway construction this year. It spent 700 billion yuan in 2010.

Go to Forum >>0 Comment(s)