The days of gridlock on China’s railways during the New Year are long gone, largely thanks to constructing the world’s longest high-speed rail network. There are now 29,100km of lines in operation with plans to build another 15,900km by 2030.

Passengers can now buy a high-speed rail ticket on their mobile phone and check in using facial recognition technology in a matter of seconds.

Yet although China has a higher volume of rail passengers than any other country, the number of times a year that an average citizen travels by train remains low compared with other major nations. Even though the Chinese average has doubled over the past decade, it is just two trips a year. That compares with 12 in Spain, 25 in Germany, 64 in Switzerland and 73 in Japan.

But that illustrates the scope for growth in Chinese railway travel. Rail travel frequency could almost double again, from 3 billion passenger journeys in 2017 to 5.5 billion by 2022 – equivalent to 13 per cent annual growth. If people made just one additional trip a year, passenger volume would increase by 43 per cent or 1.3 billion journeys.

The outlook for freight transport is also changing. Beijing’s current five-year plan demands better connections and feeder volumes to the national trunk routes and the strategy for switching freight from truck to train should ensure double-digit volume growth continues there too.

That far exceeds even the 6 per cent-plus growth in the Chinese economy but expanding the rail network is part of Beijing’s plan for maintaining GDP growth. In July 2018, the government announced plans to increase infrastructure investment to stabilise domestic demand in light of the challenging economic conditions caused by global trade tensions.

This should create a favourable policy framework for encouraging private-sector involvement in infrastructure investment that will help the country’s railway operators.

After 15 years of investment, China is now home to 60 per cent of the world’s high-speed rail network. Although some may think adding another 15,900km will mean China has overbuilt its railway infrastructure, we think urbanisation and changes in travel behaviour make it essential to enlarge the network even further.

The Yangtze River Delta already has adequate high-speed rail infrastructure but China’s four other urban clusters have a similar potential. The potential demand for train travel in those four regions alone could be about 9,000km, requiring investment of RMB1.3 trillion – almost USD200 billion.

China’s transport infrastructure is changing people’s travel behaviour. Rising middle-class consumption is driving demand for convenience, comfort and punctuality. And a well-connected and efficient transport network generates demand.

Chinese people are travelling more, regardless of mode. There has been a five-fold increase in all travel between Beijing and Shanghai – air and rail in particular – over the past five years but the rail network provides a more convenient and cheaper way to travel.

Disclosure and disclaimer

More, collapsed
Emerging markets trends in Latin America
Navigating complexities through customisation
Join the conversation?

Join our Linkedin group to get an unparalleled view of macro and microeconomic events and trends from a bank that is a leader in both developed and emerging markets.