Safety concerns may slow Chinese high speed rail, but expansion plan an economic necessity

By Shyam Raman, Research Analyst, Automotive & Transportation
Email: shyamr@frost.com

On 23rd July 2011, a collision between two high speed trains in China’s Zhejiang province resulted in the death of 35 people and left 192 injured. Initial reports suggest that the first train was stationery due to a power outage caused by a lightning strike when the second train struck it from behind.

This has prompted authorities to fire three high ranking rail officials in light of this tragedy, network safety fears, and amid corruption allegations. Rail officials have now suspended the services of 58 trains, and called for a nationwide safety and reliability check.

The China Rail Investment Corp. has issued an estimated US$ 150 billion to finance HSR construction from 2006 to 2010. Further spending on HSR is expected to be 4 trillion Yuan by 2015. It is yet to be confirmed what effect this incident will have on these ambitious proposals. Following the accident, shares of Chinese rail equipment manufacturers fell by 7 to 15%. This is the first real test that China’s high speed rail service faces in terms of consumer preferences and stock market volatility.

Possible cause for alarm

It should be noted that the accident happened on a route that opened to commercial service in 2009, the trains that collided are from the first generation of China’s high speed trains (with a top speed of 250km/hr) and not the latest generation trains that are capable of traveling at speeds excess of 350 km/hr. While lightning strikes are beyond human control, the cause for the power outage can definitely be identified and future trains will have improved power protection.

Investigators had initially speculated that there was a miscommunication or lack of communication to the train behind. In China, high speed lines that operate within 200-250km/hr utilize CTCS level 2 control for rail signaling (Rail signaling is a system that is used to control railway traffic to prevent trains from colliding). CTCS 2 constitutes of track circuits, balises (balises serve as ‘beacons’ that pinpoint the location of a train) and automatic train protection.

Faulty communication or failed automation?

The automatic train protection system is microprocessor based and uses audible warnings to warn the train driver. The system applies brakes if the driver fails to respond to the warnings. Officials initially suspected that the lightning strike could have caused the ATP onboard the affected train to send wrong signals to the control network. Hollysys and CSR Times Electric which supplied the parts for the trains cars’ ATP security system have released a statement saying that the ATPs functioned normally during the accident

If the fault is in the signaling infrastructure, China could be looking at upgrading faulty systems on its entire high speed network. It is still too early to comment on the cost of these works. Hollysys recently won the contract to supply its signaling solution for the Panjin-Yingkou high-speed line at approximately US$3.03 million. With China’s target of 45,000 kms of high speed in operation by 2015, the market size for signaling is estimated at US$ 1,274 million (approximate).

There is also the possibility of human error where the driver in the succeeding train may have disregarded the warning signals. Even if the train failed to issue alarms to the driver of the succeeding train, the ATP should have forcefully stopped the train by applying the brakes. The global rail community now waits anxiously for the results of the investigation that will determine the cause of the crash.

Implications on High Speed Rail

The immediate implications to China’s HSR network will be an increased focus on safety (which was already high), and markets could open up to usher in traffic management systems, control systems and power electronics that learn from this tragic event, and are adapted accordingly. The investigation process, new ministry, and corruption scandal could cause delays in the awarding of new contracts as well as ongoing HSR projects. Many companies that supply technology to Chinese HSR have a high level of accounts and unbilled receivables. Failure to collect payments could affect company cash flow, stock value and operations.

By 2013, China plans to add 26,000 km of new lines; including 9,200 km of high-speed lines to ease pressure on the country’s congested and constrained rail network. By late 2013, 800 additional high speed trains will be in active service. China’s high-speed railway is expected to amount to half of the world’s total length by the end of 2012 as they are adding 5,000km (average) of high speed lines every year, compared to 1,000km (average) in the whole of Europe.  Currently, rail construction projects worth 2.1 trillion yuan (US $300 billion) are under way in China. Experts fear that such rapid and aggressive expansion plans may have compromised safety.

However, although current confidence levels in China for HSR have reduced, it is likely that they can regain their position in the market place as time passes, and the necessary safety and regulation checks are undertaken. Domestic and regional airlines struggled to stay afloat post 9/11 as passengers used alternate methods of travel due to apprehensions about safety.

Growth of high speed rail inevitable

HSR aims to attract passengers from conventional rail services and other modes of transport. To do so passenger fares must be competitive and not expensive. It is far more detrimental for trains to be traveling back and forth with low occupancy rates due to high ticket prices compared to trains running full due to cheaper affordable tickets in a place like China, where other modes of transportation are particularly congested. Mass transportation is for the masses and operators must keep this in mind and trade off margins for volumes. The new Chinese railway minister had already reduced the top speed on main high speed lines from 350km/hr to 300km/hr.

Reduction in train speeds will result in the reduced energy consumption and costs, which could allow the operator to lower its ticket prices. Cheaper fares increase attractiveness to passengers which will help boost passenger volumes in the short term, which could be a necessary step to overcome initial consumer fears. Season tickets must be marketed aggressively, like the “rail pass” in Japan which allow for unlimited travel on any JR train service. Such measures will surely increase patronage and increase desirability of the high speed service.

China’s export of high speed rolling stock and technology will not be affected to the extent that some analysts are claiming it will. The Eschede train disaster (1998) in Germany with death toll of 101 has not stopped the export of German HSR technology to the world. After investing such enormous amounts of money, effort, and developing ground breaking technology, it is outrageous to think that China will abandon its plans for high speed rail. In the short term, the power failures plaguing the new Beijing Shanghai line and the bad press associated with the accident will make things difficult for China to secure new orders, especially in Europe and North America. However, China is also lending money to emerging economies to fund their high speed aspirations (example Turkey) where it is expected that Chinese technology will be favored.

There is no denying that roadways are becoming further congested and nations around the world are looking at integrated multi modal transportation solutions that reduce congestion. There is speculation that China’s commitment to high speed rail might reduce and further expansion could be halted. Europe and Japan both stand testimony for safe and effective high speed rail networks that provide public transport services as well as a viable business model. Rail transport is not just an option for China but the only way to tackle spiraling pollution and congestion linked to road traffic; for both passenger and freight.

HSR accidents are very infrequent and do not allow for the calculation of accident rates. Whilst this incident in China is both tragic and what’s worse seemingly avoidable, China should learn from this to ensure the most stringent of International rail safety standards are adhered to going forward, but not abandon their pioneering HSR program.

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