High-speed Rail in California versus China

Today’s New York Times carries an article about high-speed rail in California. It seems that if everything goes according to plan and there are no difficulties or delays, the state will spend $68 billion to build a 520-mile railroad to be completed by 2029 ($131 million per slowly built mile).

How do the innovative geniuses of California compare in performance to the plodding dullards of China? http://en.wikipedia.org/wiki/High-speed_rail_in_China says that the Chinese will spend $300 billion to complete 16,000 miles of track by 2020 ($19 million per quickly built mile).

[You might ask whether or not performance is comparable. Wikipedia says that the Chinese trains can go 160-220 mph. Wikipedia says that the California system will have speeds of “over 200 miles per hour” (and also that the system might cost closer to $91 billion.]

Update: Another way to look at this is what it would cost to fly people back and forth between these destinations efficiently. Absent government regulations to protect local carriers and unions, Americans would be flown around by an efficient airline such as Ryanair. This costs about 7 cents per seat mile (source). So the cost of taking one passenger on a 520-mile trip would be about $35. Suppose that the $91 billion estimate is more realistic and that, instead of being used to construct this railroad, it were invested in infrastructure projects in growing economies and yielded a 4 percent real annual return. That’s about $3.64 billion per year in cash, enough to fund 104 million one-way trips every year (i.e., 2.7 trips per year per current California resident). So instead of paying $91 billion for this railroad and then also paying for tickets to ride on it, Californians could use the money to pay for virtually unlimited free north/south air transportation (http://www.transtats.bts.gov/ shows that Americans and foreign visitors only got on airliners about 643 million times in 2013).

[Update 2018: One wag’s comment on the new cost estimate of $77 billion and new delivery date of 2033 was “People used to rob trains. Now trains are used to rob the people.”]

11 thoughts on “High-speed Rail in California versus China

  1. Your numbers show that the price per mile in California is 6.9 times larger than in China. The GDP per capita in California is $43,647, and in China $6,569. This gives a ratio of 6.6, more or less in the ballpark of the rail costs. Given that most of the cost to build the rail is in form of wages and land compensation, the numbers seem about right.

  2. It could be worse. The controversial HS2 high-speed rail project in the UK is projected to cost 42B GBP for 335 miles, which is $200M per mile. The first section is supposed to open in 2025. The government’s cost estimates have been disputed, and other estimates of 70 or even 80B GBP have been suggested.

    I assume that some of the difference between rail projects in the west and China is down to less emphasis on property rights and public consultation in China, allowing them to build along low-cost routes with little regard to objections from landowners and nearby residents.

  3. I think the property rights/wages is a good point. Many big projects in China run roughshod over villages, more or less forcibly moving the populations, let alone compensating at US property price levels (the GDP comparison is probably useful here too). The other, albeit possibly minor in comparison point is that other costs such as environmental studies/auxiliary abatement projects were not likely as well or at least transparently funded in Chinese projects. Some of the costs were indirectly accounted for, for example through bank loans that are outside the budget figures. It’s quite difficult to find accurate figures in Chinese accounting. US also has some pretty crazy safety requirements as far as engine/car construction standards that are much more onerous than Europe or Asia.
    Somewhat related – until I logged in to SSA this year to check my promised SS benefits, I never knew that the Federal Railway Authority has an entirely different pension system from Social Security, different taxes – different benefits.

  4. Who is one of the big contractors on the project? Is it the case that a big construction company which is partially owned by Blum Capital won the contract? Blum Capital is run by Richard Blum – Diane Feinstein’s husband. Surely just a coincidence…

  5. Tiago: The labor cost comparison would make sense to me if both the Chinese and the Americans were digging out the railroad bed with hand shovels. But if they are instead using heavy equipment, why would labor be the dominant cost? Also, the steel rails and the rest of the mechanical components should be priced approximately the same worldwide (absent tariffs and trade restrictions).

    The cost of a car, airliner, television, or single-family house in China is not 1/6th of the price in the U.S.

  6. It seems likely also that in China, the train will not be limited to travelling from one city where nobody who can afford train tickets can reasonably get by without a car to another city where the same holds true…that is, that unlike the California project, some people might actually _benefit_ from having the new Chinese trains in service. Whereas high speed rail in California is purely a prestige project by which leftist politicians can pat themselves on the back for spending gigabucks of other people’s money on a train that within epsilon of _nobody_ is actually going to ride.

  7. Phil: labour costs are usually 50% or more for most construction projects. See e.g.: http://goo.gl/ABc5sx

    That still does not account for the full figure, however. Land compensation is actually a lot less than I had imagined (about 6%), according to the California High-Speed Rail Authority own study:


    However, I still think it is a long stretch to expect the CA costs to be comparable with the Chinese costs, where a comprehensive network already exists, and a lot of the initial development costs have already been provided. Too much variables to pinpoint the cost difference clearly. If you check page 15, table 3 of the following:


    You’ll notice that construction costs per mile vary considerably even within the same country. It is much cheaper in countries/regions with an existing network. E.g. in Japan the Tokyo-Osaka line was about 10x cheaper than the latest Shinkansen like from Tokyo-Aomori. According to the same data, the real costs of Chinese high-speed rail in popular lines are between $30-50 million per mile. This is more in line with data that shows the building costs in China to be about 60% of those in the US:


  8. Isn’t the answer partly here in our backyard? Why it cost far more to build a house in NY City, NY vs. Toledo, OH? Why grocery is cheaper in one state compared to another? Cost of living? Etc.

  9. Why are big infrastructure projects so expensive in developed-world nations, even before the cost overruns? This is a question that infrastructure economists have been looking at recently. We don’t know the answers for sure yet, but the University of Minnesota’s David Levinson has compiled a list of 39 hypotheses about developed-world infrastructure build costs at blog.lib.umn.edu/levin031/transportationist/2012/02/why-transportation-costs-too-m.html. The leading candidates (not that I would see them all as important) include:

    * Commitment to tunnelling for road and rail rather than tearing up big chunks of cities. My first guess is that this is the biggest single factor; there is a general view within the industry that most HSR costs are located within 40km of the terminuses.
    * High build standards generally (safety, social, environmental, architectural).
    * One-off nature of the projects. (China, building 20,000 kilometres of HSR lines, will get economies of scale, as has Europe to a lesser extent. The US won’t get much.)
    * High labour costs.
    * High land costs.
    * Process costs to get the power to acquire and use land. (The Chinese government can happily tell 1.3 million people to move when it wants to build a dam; western governments rightly cannot .)
    * Insufficient commitment to detailed benefit/cost analysis, which in turn leads to a get-it-done-at-any-cost mentality.
    * Lack of competition among construction services providers.
    * Poor government oversight.
    * Political pressure to add extra features (tunnels to protect creeks and forests, extra stops at smallish towns etc)

    I would add that as noted above, Chinese government figures about their achievements on high-speed rail (and most other things) should be taken with many grains of salt.

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