China is taking the rare step of sharply raising passenger fares on four major bullet train lines, in its broadest move to address rising costs and heavy debts since construction of the system began nearly two decades ago.
The higher train ticket prices are part of an effort to increase prices for public services. Earlier this year, water and natural gas bills began to rise in some cities.
Public services in China are heavily subsidized by local governments. But huge municipal debts mean these governments have less money available to keep prices low.
The increase in prices can curb the losses of some giant state companies that provide these services. And making consumers pay more helps offset widespread price declines in the Chinese economy as growth slows.
China has already sharply increased electricity rates since 2021 for many factories, although residential customers continue to pay low, subsidized electricity rates.
“All large factories should now pay a market rate,” said David Fishman, senior manager in Shanghai at the Lantau Group, a Singapore-based energy consulting firm.
Rising railway fares are a sensitive political issue in China. Bullet trains are a symbol of the country’s ability to build infrastructure, often even before there is consumer demand. But that infrastructure has been paid for with huge loans, reaching $870 billion for China State Railway Group alone, the state-owned company that manages the rail network.
The Ministry of Finance has ordered a dozen of China’s most indebted provinces to reduce their infrastructure spending this year in exchange for debt relief. China’s leadership is shifting the country’s growth strategy from infrastructure and real estate investments toward high-tech manufacturing and exports. But that has angered the United States and Europe, which fear that additional Chinese exports could cause job losses and undermine their industrial base.
China has opened 45,000 kilometers of bullet train routes since 2008. The routes connect all major cities and hundreds of smaller cities and towns. To put its size in perspective: the system is long enough to span the continental United States more than 10 times from New York to Los Angeles. The first line opened just before the Beijing Summer Olympics.
China’s bullet trains typically run at 300 or 350 kilometers per hour, depending on the route. Since the tracks are straight, trains travel long distances without slowing down.
But the debt incurred to build that network is not limited to China State Railway Group. Many of its lines are owned by joint ventures with provincial and municipal governments that helped pay for construction and are increasingly less able to subsidize transportation.
Some of the older lines are starting to require more maintenance. They were hastily built during the global financial crisis to employ hundreds of thousands of workers who had lost their jobs when export factories temporarily closed.
The railway system explained this month’s fare increases in a statement to the official Xinhua news agency, saying that “operating costs such as line maintenance, vehicle purchases, equipment upgrades and labor employment have undergone important changes.
The tariff increases have generated considerable commentary on social media in China. Much of this has been negative, as wages have stagnated in recent years and real estate prices have plummeted.
“Everything is going up, except salaries,” one person complained.
Fares are increasing for peak-hour travel along routes from Hangzhou to Shanghai, Changsha or Ningbo and from Wuhan to Guangzhou. Many of the cities are fairly prosperous communities near the Yangtze River and its tributaries in central China. But the price increases will also affect travelers in smaller, less prosperous intermediate cities.
Peak fares will increase by almost 20 percent for first and second class tickets at peak times, except on the route between Hangzhou and Changsha, where the increases will be smaller. Fares will increase by up to 39 percent for luxurious VIP business class seats, which feature lie-flat seats that resemble those in business class on intercontinental flights.
The railway system said in its statement to Xinhua that increasing peak fares would make larger discounts possible for some off-peak tickets and for slower trains that make more stops.
The rate increases may have drawn public attention due to their pronouncement. The railway system increased second-class fares on the country’s busiest route, between Beijing and Shanghai, by 8 percent at the end of 2020 and then another 10 percent a year later.
China’s bullet trains remain less expensive than those in the West. “At the end of the day, Chinese railways are still cheaper than those in Europe, Japan and the United States,” said David Feng, an international railway consultant in Beijing.
With the price increases, the maximum fare for a second-class high-speed train ticket from Wuhan to Guangzhou, a trip of nearly 600 miles that takes less than four hours, will soon be $78. A ticket in first class, which has two seats on either side of the aisle like economy class on American trains but with more legroom, will cost $125, and a lie-flat seat in business class will cost $273.
When the system opened, many in the West predicted that its cavernous stations would never be filled. Today, lines serving some smaller cities, especially where economic growth has stagnated or worsened, are infrequently used. But in larger Chinese cities, such as Shanghai, trains are popular.
Train stations in these cities have become crowded, particularly during holidays such as the recent five-day May Day break. Shanghai’s Hongqiao Station, with a departure hall as long as three football fields, was still besieged two days after the holiday ended.
Beijing and Shanghai platforms that were built for 16-car trains now have 17- or 18-car trains. Trains run frequently: there are more than 80 a day between Beijing and Shanghai.
But hundreds of smaller cities and towns have built large stations, even if they have just one train a day. China State Railway invested another $108 billion last year in further expansion, much of it to connect peripheral areas. However, it reported operating profits of only $470 million, leaving it little money to pay off debt.
New towns and cities have grown along high-speed rail lines. High-rise zoning on many blocks around each station has meant that large numbers of people live nearby and use them. Many Chinese use the lines to travel weekly or even daily from low-cost cities, where apartments can rent for less than $100 a month, to jobs in larger, much higher-cost cities.
Li you contributed to the research.