Merger boost to high-speed trains

This is indeed good news, but China needs to be rational in its decisions in regard to its "going global" policy. Take the recent initiative of a Eurasian high-speed transport corridor linking Beijing and Moscow as an example. The aim of the proposed transnational rail network is to reduce the travel time between Moscow and Kazan, an important city on the Volga River, from 13 hours to three-and-half hours, according to the Moscow Times.

Ideally, once it becomes operational, the project should benefit both countries as a symbol of mutual trust and strategic cooperation. But the same cannot be said about economic benefits. So, comprehensive risk assessments have to be carried out before starting the project to avoid unnecessary disputes over design, financing, construction and other aspects. Russia's lack of experience in running high-speed trains within or beyond its borders should also be kept in mind.

The entire capital-to-capital route is unlikely to be implemented as designed. Given the awfully long distance (more than 7,000 km) between Beijing and Moscow and the very limited passenger volume at stations in between, especially on the Russian side, there is little possibility of making enough revenue to even maintain the sophisticated equipment on both sides of the border, let alone earning profits.

Moreover, given the poor financial condition that it is in now, Russia is unlikely to cover the loss in running any more railways, especially high-speed ones. Apart from the costly construction expenses, including labor costs, in the country, the graver challenges confronting Russia are related to operation: nearly all high-speed railways are a heavy financial burden on operating countries, including China.

China should only be a contractor for building railways in Russia, without getting involved in operating them. And Russia could offer its rich natural resources such as oil and gas to China in return for the technological support.

The Japanese Shinkansen, which connected Tokyo and Osaka in 1964, is presumably the only profitable high-speed railway enterprise in the world. Its success can be attributed to its early start both in construction and operation - especially the highly concentrated population on the route. Also, cheap land price and labor cost in Japan in the 1960s contributed to Shinkansen's profits.

Hence, China's high-speed railway cooperation projects with other countries should be carried out pragmatically and cautiously, one step at a time. This is to say that all parties involved, including governments and enterprises on both sides, should work on scientifically drafted plans to minimize potential risks at every step of a cooperation project.

The author is a professor of economics at Beijing Jiaotong University. The article is an excerpt from his Interview with China Daily's Cui Shoufeng.