As the Chinese government bets on a high-speed rail network to revive its economy, state-run China State Railway Group has had its debt ballooned dramatically. 

Nikkei Asia reported on July 6 that the firm’s total liabilities accumulated to 5.91 trillion yuan (882 billion dollars) by the end of last year. That accounted for 5% of the second world economy’s gross domestic product. 

China already boasts the largest network of high-speed railways, having more than 37,900 kilometers (about 23,500 miles) of arteries crisscrossing the country that connected all of its major mega-city clusters. 

Last year, the country added 2,168 kilometers (1,347 miles) further to its network. The Chinese government is still ambitious for a total of 70,000 kilometers or more than 43,000 miles to its massive system in 2035.

Nikkei Asia said there were high expectations that the project would support associated industries and generate jobs.

Zhao Jian, a professor at Beijing Jiaotong University and an expert on transportation, commented, “The government’s priority is economic growth and it doesn’t care about debt repayment, but each kilometer of railway costs 120 million yuan to 130 million yuan to build.”

While that prospect might take time to materialize, there is a resounding reality that China Railway is facing a hefty piling of debts.

Last year, the company also registered a net loss of 49.8 billion yuan, over 7.4 billion dollars. 

The pandemic in China is taking a toll on railway performance. China Railway’s passenger numbers dropped 29% from pre-pandemic levels to 2.35 billion last year. The figure remained minimal between January and March because of new flare-ups this year.

Furthermore, the Huanggang-Huangmei link in Hubei 湖北 province, which commenced in April, has been attracting a few riders as well as hotels and other businesses.

The report said that China Railway has also listed a number of its subsidiaries in an effort to draw investment from the private sector since 2020. However, professor Zhao believed the private funds might be too insignificant to afford the company, which is a giant state entity.

One silver lining is that the company is operating well in freight service. Last year, group-wide freight service income totaled 435.9 billion yuan (64 billion dollars), above the 302.1 billion yuan (45 billion dollars) for passenger service. 

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