New borrowing rules to prevent a housing market bubble from bursting led to a decline in China’s real estate market, which once accounted for 25 per cent of the country’s gross domestic product.
In turn, other infrastructure projects including the high-speed rail network, which relied heavily on local government borrowing and subsidies, were affected.
Fixed asset investment in China’s rail infrastructure in 2022 dropped to about 711 billion yuan (US$100 billion) – an 11 per cent fall compared to pre-COVID levels.
Compounded with low passenger volume during the pandemic, Chinese officials called on local governments to curtail investments in high-speed rail projects.
“The Chinese central government was ready to transfer some of the money but they expected more of the initiative to be at the local level,” said Professor Liu Baocheng, from the University of International Business and Economics.
“There are (also) high probabilities that some of the localities are not very effective and they will be further driven into the debt hole.”
The state-owned operator that runs the rail network, China’s State Railway Group, had total liabilities reaching 5.91 trillion yuan at the end of 2021.
Early this year, China raised bullet train fares at four major high-speed lines as it struggled with debt and high cost, amid a stuttering economy.
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Publish date : 2024-08-13 20:02:00
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