1 Talking Point 7 Week in 60 Seconds 8 China Consumer Week in China 9 Economy 10 Cross Strait 11 Banking and Finance 13 Environment 15 Society and Culture 11 December 2015 20 And Finally Issue 307 21 The Back Page www.weekinchina.com Who will bite the bullet? m o c . n i e t s p e a t i n e b . w w w Hong Kong’s high-speed train to Guangzhou has become a political time bomb after cost overruns and delays Brought to you by Week in China Talking Point 11 December 2015 Train of events Hong Kong railway row points to changing times in the Pearl River Delta The through train: China’s high-speed rail network will reach Kowloon by late 2018, after a three-year delay “ t was not a question of whether 1908, two years before the railway Hong Kong’s status as the premier Ithe undertaking would be an im - between the colony’s Kowloon dis - port in the region. Today Hong mediately remunerative concern: it trict and Canton (now Guangzhou) Kong is feeling the heat again, al - was not a question of whether the first opened. though this time more from rival railway would pay interest on the The trip took four and a half Chinese cities nearby. A century capital expended, or even if it would hours, or five times the journey time ago, the railway construction teams at once pay working expenses. It of the high-speed link now being ran into a series of engineering was a question of preserving the constructed between Hong Kong problems (ditto this time). And in predominance of Hong Kong. It was and Guangdong’s provincial capital. another similarity to today, there a question of seeing that the final But what is striking are some of was controversy about the termi - outlet of the main trunk railway of the similarities between a century nus in Kowloon (local officials back P h o t o China should be at Kowloon, and at ago and the high-speed venture then had bought land for the sta - S o u r c no other place.” today. Back then the railway was tion only to be wrong-footed when e : I m a That was Sir Frederick Lugard, prompted by concerns that foreign the site was changed). g i n e C Hong Kong’s then governor, speak - powers were increasing their influ - History really does repeat itself, h i n a ing to his legislative council in ence in southern China, threatening it seems. But what does today’s 1 Week in China Talking Point 11 December 2015 high-speed track tell us about where Hong Kong is heading to? Fury over funding The first phase of the Express Rail Link – carrying passengers between the Chinese mega-cities of Shen - zhen and Guangzhou – opened four years ago. But on the other side of the border, Hong Kong’s contribu - tion to the project is mired in polit - ical wrangling over who should shoulder the bill for delays in build - ing its own section of the line. The railway was supposed to be operational this year but it now looks likely to open in the third quarter of 2018 at the earliest. MTR Corporation – Hong Kong’s railway operator – blames difficulties in bor - ing the tunnels that carry the rail - way underneath the city, as well as cost overruns for the ambitious ter - minus in West Kowloon, a popular A century apart: Hong Kong’s two cross-border railway links residential area for mainland Chi - nese investors and just across the will go back to the government, now faces two crucial sets of ap - water from Hong Kong Island. which owns a 75% stake in the rail - provals: members of the Legisla - The expense has been huge, with way firm. That means taxpayers tive Council – the territory’s the track costing about 16 times as won’t need to foot the bill for addi - quasi-parliament – are expected to much per kilometre as the high- tional funding, while MTR will need decide on whether to accept the speed line between Shanghai and to raise capital, which should be a funding proposal in February; that Beijing, according to the Hong Kong boon for local banks and the local same month MTR minority share - Economic Journal. Most of it is bond market. But adding leverage holders vote on the plan too. being built underground, of course, will also saddle MTR with substan - adding substantially to the bill. But tial debt servicing costs – particu - Will the new line pay for itself? the Hong Kong government is furi - larly if it borrows, as has been Hong Kong’s section of the track is ous with the failure to deliver the rumoured, around HK$30 billion. just 26km long but its symbolism is railway on budget and on time. The knock-on result may be higher outsized in linking it to China’s MTR executives have countered fares for ordinary Hongkongers high-speed rail network, allowing that its contract stipulates that the using MTR’s subway lines. passengers to connect directly via government bears the financial The row comes at a time when Guangzhou to Shanghai and Beijing. risks of construction delays. And on the 42km Hong Kong-Zhuhai- However, when the railway was November 30, the government Macau Bridge – due to connect the first mooted, it was presented to agreed to provide additional fund - territory directly with the western local taxpayers more for its eco - ing not exceeding HK$84.42 billion bank of the Pearl River Delta– is nomic value. This was framed not ($10.9 billion). That should get the also set to miss its completion date only in terms of the jobs created C r e d railway finished, although it consti - by at least a year (completion is during its construction, but also i t : A d a tutes a HK$19 billion increase on now not expected till the end of the boon that would result from p t e d f the HK$65 billion approved by the 2017). Part of the hold-up is because vastly reducing the travel time be - r o m C territory’s legislators five years ago. an artificial island is showing signs tween Hong Kong and Guang - r e a t i v e In exchange MTR will pay a spe - of subsidence. Again more public dong’s major conurbations. The C o m m cial dividend to shareholders, most money is required. full line will stretch for 140km be - o n s of which – also about $19 billion – Meanwhile the Express Rail Link tween Hong Kong and Guangzhou, 3 Week in China Talking Point 11 December 2015 with stops in the cities of Shenzhen and Dongguan along the way. It will take just 14 minutes to travel between Hong Kong and Futian station in Shenzhen, while the journey to Guangzhou will be cut in half to 48 minutes. These shorter journeys will de - liver about 42 million hours of saved time each year, transport bosses reckon, contributing towards the HK$87 billion in economic ben - efits estimated over the railway’s first 50 years in operation. Opponents of the railway say Work in progress: a photo of Kowloon Station (taken this morning) hefty ticket prices and large num - bers of commuters will be needed A shared immigration facility in on unified border control at the to justify its construction costs. Pas - Hong Kong would be unprecedented: high speed train project. But oppo - senger trips on trains between the current line to Guangzhou has nents of the plan immediately Hong Kong and Guangzhou num - separate immigration controls and cried foul, warning that it would bered 4.48 million in 2014, says the although one of the newer road contravene the “one country, two Hong Kong Economic Journal. Even crossings does have shared facilities, systems” principle. Yuen says that if half of these people switch to the they were built on mainland Chinese the arrangements can be designed faster express, it could take 75 years soil, not in Hong Kong. in a way that won’t contradict to recoup construction costs. The alternative option is passen - Hong Kong’s autonomy over cus - ger checks at control points in toms procedures . But his detractors Political resistance too? Kowloon and Shenzhen, where the are asking whether immigration The thorniest issue at stake lies at railway crosses the border. But, as officers from the mainland will the planned West Kowloon termi - afore stated, this would erode block people from travelling to nus: how to arrange the customs much of the savings in travel time, China based on criteria mandated and immigration procedures for and thus undermine the economic in Beijing (despite performing passengers. benefits of the project. their duties on Hong Kong soil The current plan is to put both The debate about how to manage where no legal objection to right of sets of border formalities at the ter - the border controls comes at a time travel could apply). minus in Hong Kong’s Kowloon. when more Hongkongers are sensi - Then there are the wilder fears This is a decisive part of the Express tive to what they perceive as Chi - that the co-location decision is a Rail Link’s value proposition – be - nese encroachment on their city’s Trojan horse for deeper meddling cause it means cross-border com - way of life. with Hong Kong’s guarantees muters will spend a lot less time This kind of sentiment con - under the Basic Law.