Expert Commentary

China’s high-speed-rail network and the development of second-tier cities

2013 study published in Proceedings of the National Academy of Sciences on how the introduction of bullet trains is associated with rising real-estate prices in China’s secondary cities.

High speed train in station

China introduced its first dedicated high-speed trains in 2008, and has since developed an extensive network that connects more than 100 cities and carries 2 million passengers a day. By 2015 the country plans to extend the network to 19,000 kilometers (about 11,800 miles), with a mixture of new and existing infrastructure. On the dedicated high-speed lines, trains can exceed 300km/h (186mph); secondary lines allow travel between 200 and 299 km/h (124-185mph); and existing lines that have been upgraded permit some high-speed travel.

The system’s rapid expansion hasn’t been without problems and controversy. In July 2011, two high-speed trains collided, causing 40 fatalities and 172 injuries. The investigation concluded that defective signal equipment and official corruption bore the primary responsibility, but also found that there was an emphasis on speed over safety. China’s rail expansion continues, however, and the authorities are even planning a $1.5 billion IPO in early 2014. According to a 2013 World Bank report, the scale of China’s high-speed railway network is supported by its densely populated city centers, affluent consumers’ growing purchasing power, and traffic congestion on other travel modes. Other key factors include China’s low construction costs, lax environmental rules and strong government support — both financial and political — for high-speed rail.

The result has been a transformation of travel in China: Bullet trains now carry twice as many passengers each month as the country’s domestic airlines, and have an annual growth rate of 28%. The larger economic impacts have been more difficult to quantify, however. National and local governments focus mainly on regional economic development, but the economic benefits can take decades to materialize as industries and workers relocate in response to improved access to megacities. To better understand this process, a 2013 study published in Proceedings of the National Academy of Sciences (PNAS), “China’s Bullet Trains Facilitate Market Integration and Mitigate the Cost of Megacity Growth,” looks at the impact of high-speed rail on real-estate prices in second-tier cities near Chinese megacities such as Beijing.

The study’s findings include:

  • The introduction of the high-speed railways is responsible for 59% of the increase in average market potential for the cities connected by bullet trains. (Market potential, a concept used by economic geographers, measures “a geographic area’s access to markets for inputs and outputs.”)
  • A 10% increase in a city’s market potential is expected to be associated with a 4.5% increase in its average real estate price. “Changes in city real estate price dynamics should reflect the expected impact of major infrastructure investments.”
  • Based on the study of four cities, the authors estimate that there is a 4.3% average increase in real estate price per billion passenger-kilometers annually.
  • The introduction of high-speed rail can cause travel by other modes to drop, but overall can increase travel. After China’s Wuhan-Guangzhou bullet train was introduced in 2008, the number of weekly passengers on conventional train lines declined from 150,000 to 45,000; air flights fell from 13 to 9 per day; and highway traffic decreased. Overall, however, total passenger flow experienced a large net increase, indicating high-speed trains encouraged additional intercity trips.
  • Taking China’s historical railway network into account, the correlation between market potential and real estate prices is weaker, suggesting the Chinese government linked booming cities with high-speed train lines in order to maximize their ridership.
  • Overall, China’s high-speed network facilitates cross-city economic integration by improving market access, expanding labor market, and enhancing spatial agglomeration. By offering more location options to firms and workers, bullet trains reduce congestion and pollution within megacities, and stimulate the growth of the nearby second-tier cities.

The authors conclude by noting that “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 [high-speed rail] on nearby residents.” Still, with sufficient population density, nearby secondary cities and congested traffic on competing modes such as highways, high-speed rail can be both cost effective and provide wider economic benefits.

Related research: A 2012 study from the University of Southern California, “China’s Life Satisfaction, 1990-2010,” found that despite considerable economic growth over the period surveyed, no evidence was found that life satisfaction in China had increased. In part this is because the country has become “increasingly unequal” since 1990, with wealthier and more educated Chinese experiencing increased levels of life satisfaction, while that of lower-income and less-educated residents declined significantly.

Keywords: high-speed rail, bullet train, transportation, infrastructure, urban development, megacity, real estate, congestion, pollution, Asia, land use

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