Economic Geography of China’s Bullet Trains

The concept of the bullet train [or high-speed railways (HSRs)] was born in 1964 with the formal opening of Japan’s Shinkansen. The bullet train is regarded as one of the most significant technological breakthroughs in passenger transportation developed in the second half of the 20th century.

In the 1990s, the average speed of Chinese conventional trains was below 60 km/h. The speed had been raised several times in the late 1990s and early 2000s, but the highest speed did not exceed 150 km/h. The Ministry of Railway (MOR) announced its ambitious bullet train plan in 2006. [The typical financing arrangement for constructing bullet train lines is that the MOR pays 50–60% of the total cost and the destination cities pay the remainder (http://finance.people.com.cn/GB/1037/8743758.html).] The first set of bullet train lines opened in April of 2007, boosting the speed of some major trains to 200–250 km/h. In August of 2008, to coincide with the 2008 Beijing Olympic Games, new bullet trains opened between Beijing and Tianjin. They reached a higher top speed of about 350 km/h. By the end of 2010, China’s bullet train service length reached 8,358 km. By 2020, China’s total service HSR length will reach 12,000 km. (The average construction cost is about 100 million Renminbi (RMB) per kilometer for newly constructed bullet train lines, and this cost is much lower for upgraded railway lines. The average operating cost is about 0.3 RMB per person per kilometer.)

In Fig. 1, we provide a geographical overview focused on which cities are located close but not very close to the three Chinese megacities of Beijing, Shanghai, and Guangzhou and connected by bullet trains. Throughout this paper, the region in the range of 100–750 km (about 60–470 mi) to the megacities is called bullet train (BT) -impacted area. Tianjin is about 130 km from Beijing, and there is no flight between them. The Beijing–Tianjin BT ships about 400,000 passengers (one way) per week. [The one-way price per ride of the Beijing–Tianjin BT is 55 RMB Yuan (8.9 US dollars), roughly 2.5 times the conventional train fare. The fare price of the Wuhan–Guangzhou BT is roughly 60% of the flight fare. China’s middle class can afford BT travel. Poor rural migrants would not choose BTs, but they do not travel much. Most of them only travel one time per year, when they return to their hometowns for the Chinese New Year.] Before the BT was introduced in 2008, the conventional train shipped 150,000 passengers/wk, but this number has declined to about 45,000 passengers/wk; highway traffic has also declined (www.cnbuses.com/news/201105/36656.htm). The number of air flights between Wuhan and Guangzhou dropped from 13 to 9 per day after the opening of the Wuhan–Guangzhou BT, but the total passenger flow has experienced a huge net increase. This evidence suggests that the BT stimulates additional intercity trips.

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Fig. 1.

BT lines in the Beijing Area, the Yangtze River Delta, and the Pearl River Delta in 2010 and travel time changes in nearby cities. (Source: Ministry of Railways of China.)

The MOR’s criteria for selecting which cities to connect by BT have not been publicly stated. One possibility is that the MOR sought to build BT lines between megacities and the cities that they knew would boom, because introducing such links would maximize their ridership. The other possibility is that BT lines were built to connect weak cities to help them to grow. In Table 1, we compare several growth indicators between the cities with BT stops and other cities in BT-impacted areas for 2001–2005 (we exclude the three megacities when doing this comparison). We report sample means and conduct t tests for statistical differences in means. The t tests cannot reject the hypothesis of no statistically significant difference between the means for these two groups with respect to gross domestic product growth, wage growth, and distance to the closest megacity. The cities without BT connection seem to have higher population growth (the t statistic is statistically significant at the 10% level).

BTs Facilitate Cross-City Economic Integration

The BT improves market access, expands labor markets, and enhances spatial agglomeration. As documented in Fig. 1, this new transportation technology allows firms and workers in cities such as Tianjin to access megacities such as Beijing. High home prices and relatively low quality of life in the megacity will also nudge some households and firms to locate in those secondary cities. Because of the BT, these decentralizing households can easily travel to the major cities that offer unique shopping and restaurant opportunities because of the variety of products that can be supplied in such cities (5). Therefore, the BT simultaneously alleviates some of the congestion costs associated with urban growth in the megacities and triggers the growth of the nearby second- and third-tier cities. In this sense, the BT creates the possibility that the nearby second- and third-tier cities become a safety valve for the megacity, which alleviates concern about such cities growing too big. [Au and Henderson (6) find that a large number of Chinese cities are undersized because of the labor migration hukou restriction, but they also find that a few highly favored Chinese cities are significantly oversized.]

Economic geography research posits that information technology allows firms to keep their dealmakers downtown while sending their back office workers to remote areas featuring cheaper land (7). BTs play a similar role, because they encourage firm fragmentation and firm sorting depending on their idiosyncratic demand for megacity access. The introduction of the BT provides firms with the option to locate their headquarters in the major cities and send other activities to nearby cheaper cities. [Media stories report that, after the opening of Beijing–Tianjin BT, some large companies sent their manufacturing sections to Tianjin while their headquarters remained in Beijing. Some Information Technology engineers bought their homes in Tianjin with cheaper housing prices. They work at home and commute by BT one time per week to have meetings at their company’s Beijing headquarters (http://news.xinhuanet.com/focus/2009-04/23/content_11221789.htm; www.chinadaily.com.cn/hqpl/zggc/2012-02-19/content_5194378.html).] Firms that need infrequent access to the major city’s dealmakers and government officials can decentralize and locate in the BT-accessible second- and third-tier cities. Given that the restriction of China’s hukou system on labor mobility has been largely relaxed, if the introduction of the BTs leads to megacities retaining their superstar workers and losing their back office workers to the second-tier cities, then it is possible that the average human capital of residents in both sets of cities will rise. (The hukou system, put in place in the 1950s, was to register people by their hometown origin and urban vs. rural status for the purpose of regulating migration. This hukou restriction was relaxed, and population mobility, especially rural to urban migration, substantially increased in the 1990s when urban housing markets and labor markets were liberalized.) US empirical literature has documented the positive association between average levels of human capital and higher wages and subsequent economic growth (8⇓⇓–11).

Discussion and Conclusion

Macroeconomists view urbanization to be a necessary condition for long-run economic growth, but when such growth is centered in megacities, significant threats to local quality of life arise. If quality of life is declining in growing cities in less developed countries (LDC), then gross national product (GNP) growth overstates improvements in the standard of living (22, 23). In nations with many cities, households can vote with their feet and migrate to another city if a specific megacity’s quality of life or local labor market opportunities declines.

The introduction of the BT facilitates this migration by expanding the menu of options of Chinese urbanites and boosting second- and third-tier cities in the BT-impacted area. The HP appreciation evidence that we present in this paper supports the claim that the BTs are playing an important role in integrating China’s cities into a system of open cities. If this integration leads to less suburban growth in the megacities, then it will encourage a more sustainable urban development.

Our findings offer some insights for other countries planning to build BTs. First, high population density, a sufficient number of secondary cities in reasonable proximity to one another along railway corridors, and already congested traffic on competing travel modes are key factors that determine the cost-effectiveness of BTs (4, 21). These factors are all key determinants of a city’s gain in MP attributable to the BT. These conditions may hold in some European countries but are less likely to hold in a decentralized state such as California. Second, China’s unique political structure is likely to allow it to implement megaprojects efficiently. Chinese governments have strong power in supplying state-owned land, spending public money, and ignoring the possibly negative effects (such as noise) of HSRs on nearby residents. Such projects would face more “Not In My Back Yard” (NIMBY) opposition in the United States (4).