Transportation Deployment Casebook/2018/Chinese High-Speed Railway

Introduction
The High-Speed Railway (HSR) in China refers to trains with a speed of no less than 250 km/hr. The China Railway High-Speed (CRH) is the largest high-speed rail network ever constructed in the world with a total length of 20,000 kilometres of track. The length is much more than all other HSR networks on the planet combined. It links hundreds of cities, covering a total population of more than 700 million people. The current CRH is able to reach speeds of 350km/hr. It is even able to be run on autopilot. The main goals of the CRH is to effectively connect first-tier cities, such as Shanghai and Beijing, with other second and third-tier cities. Under the banner of “One Belt and One Road”, CRHs have been sold to more than 100 countries and regions in the word. In 2018, the Chinese government signed CRH contracts worth $18 billion US dollars, which had increased 40% since 2015. Construction on Indonesia’s first CRH began in 2018. The CRH has largely increased in the number and frequency of pedestrians movements and logistics. It has also significantly shortened transit time from one city to another. In addition, its operation is not affected by the weather, unlike air travel.

Precursor to CRH
Before the birth of the Chinese high-speed rail system, Japan had their Shinkansen high-speed rail as early as 1964. Also, the French opened their TGV high-speed rail in 1970. Both countries were significantly ahead of China. In China, the transition to high speed railways began in 1999 with the QinShen Railway; however, at the time, its maximum speed could only reach 220 km/hr. This maximum speed did not match the minimum speed of 250 km/hr of the HSR, which was established by the agreement on international railway lines (AGC). The limitations of the Qinshen Railway were obvious. Its speed was not sufficient enough to meet the Chinese demand for development, nor did it meet the speed standards of HSR in other countries within the same period. Both of the TGV and Shinkansen HSR had been around long enough to be the obvious choice. However, because the technology of HSR is the top secret in different countries, the fee for continuously importing HSR equipment was exponential. If china truly wanted to develop its transportation, it had to begin to independently research and develop its own HSR, instead of relying on other countries. This relative monopoly for high-speed rail technology and the competition between countries stirred increasing interest in investing in CHR. While China began comprehensively increasing the speed of their existing trains, it also began a train manufacturing project with the assistance of Kawasaki and other companies. With this kind of technology exchange, a solid foundation toward independent production was laid.

Technology
The completion of China’s high-speed rail can be described as standing upon the shoulders of giants. This is because many of the techniques in the development of the trains drew from other countries, such as France and Japan. The Hexie Hao (CRH) and Fuxing Hao (CR) are two types high-speed trains that are currently used in the CHR network. During the initial design stage, many technical difficulties were encountered and had to be overcome, the most important of which was the train structure. When trains reach a speed more than 300 km/hr, the resistance encountered by the train is almost entirely from the air. With the help of advanced CAD technologies and further experiments conducted in wind tunnels, some shapes that are theoretically optimal were proposed, which eventually resulted in the round bullet shape. The bullet shape head is streamlined so that air resistance can be reduced. This aerodynamically-optimised train structure has more strength, is more smooth and has better isolation. Hexie Hao (CRH) has adopted world class advanced technologies, such as lightweight aluminium alloy bodies, high speed bogie, high speed pantographs and integrated fibre optic network controls. More specifically, the train body is made of large sections of hollow aluminium, and as a result, the weight of each train body is only 7 tons. Notably, the lightweight design of the train has reached an advanced level, along with its superior energy-saving and environmental protection performance.

In order to build a truly interconnected network, the rail surface must be absolutely flat. Any uneven surfaces will be magnified indefinitely, resulting in irreversible consequences for the train. Thus, the installation of the rails must be seamless. Two rails are put together and heated to more than 1000 degrees by an electric current. Once this is completed, they are permanently joined by pressure through a special lathe. At the end of the process, the joint will have a flat even surface within a tenth of a millimetre, which is the greatest precision attained by the rail-welding industry in the world.

Market
In the beginning, the birth of the Chinese high-speed railway was targeted at the Chinese market. It aimed to speed up the existing train network and construct a new high-speed transportation network that could drive the national economy at a faster rate. In recent years, CHR has made great strides in overseas markets. Accompanied by cost effective and successful operating experiences, CRH now accounts for about 30% of the global market share. The CRH speeds range from 200 km/hr to 300 km/hr, which allows the CRH to serve a variety of market levels. Despite that, the average cost for CRH to build a high-speed rail is half of what many other foreign companies charge, while building standard are maintained. This has also attracted many high-speed rail projects from other countries, such as the XpressWest in U.S. and the Ankara-Istanbul high speed railway in Turkey. Regardless of whether it is at home or abroad, the sales of the CRH have proven that functional enhancements, which include faster train speeds and better quality, play a critical role in market development.

The indirect market effect brought on by high-speed railway is difficult to estimate. Due to the ability to substitute a variety of forms of transportation, the influence of high-speed railway on the aviation industry is more obvious. According the latest half-year earnings reports, the impact of CRH has been seen by China’s three state-owned airlines. For example, the number of airline passengers from Beijing to Shanghai has dropped by 9.9% annually.

From another perspective, the existence of high-speed railways promotes the upgrading and transformation of the regional economy. It greatly increases the flow of people and the efficiency and quality of logistics between urban areas. It also promotes the regional linkage between first-tier cities with third and fourth-tier cities. As a result, more cities are connected with the mainstream economic framework due to the CRH, and the entire market consequently has been expanded further.

Birth Phase (2004-2010)
Compared with other countries, China’s high-speed railway developed relatively late due to the limitation of national power. China’s first HSR opened in 2008. However, four years prior to that, China began planning the high-speed network. In 2004, the State council discussed and passed the first “Medium and Long-term Railway Network Plan”, which included more than 12,000 kilometres of high-speed railways. Over that same period of time, a train ran between Guangzhou and Shenzhen at a speed of 200 km/hr. In the next 3 years, due to China’s lack of knowledge regarding high speed railways, it spent massive amounts of money and effort borrowing and learning new HSR technologies internationally. Following that period of study, China selected the most suitable technology to adopt and develop. During this period, the joint venture invented the series of CRH1 and CRH2 Hexie Hao trains, which had a maximum speed of 250 km/hr. In 2007, the first domestically produced 300 km/hr Hexie Hao EMU train (CRH2-300) was completed. Then, in 2008, the first high-speed railway in China was formally put into operation, connecting Beijing and Tianjin through the 120 km-long railway. Just a year later, in 2009, the Chinese high-speed railway network increased by 900 kilometres. However, what is more shocking is that by 2010, CRH had grown to a total length of 8000 kilometers. Since that time, the Chinese high speed railway has continued to rapidly develop.

Ticket policies
The price of high speed railway tickets is still connected to the relevant fare policy formulated by the Ministry of Railways in 1997.

For example:

The Special Seat fare = 0.2805 x (1+10%) x 1.8 x mileage

The Business Seat fare = 0.2805 x (1+10%) x 3 x mileage

In addition, the CRH ticket validity period is limited to the same day. The minimum limit for fare discounts can be not less than 60% of the published fares. Each adult traveller can bring a child up to 1.2 meters in height. When there is more than one child, a child ticket should be purchased for the extra child or children.

Environmental policy
The construction of a HSR will certainly have an impact on the environment and the surrounding residents. Therefore, there have been many opposing voices, especially at the very beginning, as people have not yet felt the convenience of the HSR. Many of the citizens’ complaints included: the high-speed tracks invaded into their community; the tracks occupied private land and hindered bio-diversity; and the high-speed rail caused other environmental pollution including vibration, noise, air and visual. In order to effectively solve the environmental problems caused by the HSR and to appease public anxiety, the Chinese government established a legal system. The “Three Simultaneous” principle (the main project and pollution control facilities that were designed, constructed and put into use synchronously) and EIA (environmental impact assessment) are prerequisites in HSR construction. On a practical level, environmental protection measures have been incorporated into the planning of HSR. The Ministry of Environmental Protection also issued that a second EIA is required if major changes occur in one of six categories (noise, radiation effects, inappropriate siting, non-updated EIA reports, absence of public participation in EIA, and impacts on the panda protection zone).

Growth Phase (2011-2017)
The reason for classifying the time scope from 2011 to 2018 as the “growth period” is that the Beijing-Shanghai HSR railway was officially put into use in 2011. It connects China’s financial centre with the political centre. It also carries one-eighth of the countries’ HSR population. Therefore, after 2011, China’s high-speed railway began to grow. During this period, the HSR network expanded from 8894 km to 28500 km. It accounted for 66% of the global HSR network length by the end of 2017. Meanwhile, the much of CRH’s business shifted as 70% of the tickets and business transactions happened online. In addition, more modernised trains, known as Fuxin Hao, were put in use in 2017. Fuxin Hao trains have much lower air resistance and higher safety standards, which allows them to drive at a faster rate of speed. Meanwhile, the overseas market was also open for CRH trains, and more and more countries began to import the CRH trains.

In addition, the Wenzhou Train Collision, which occurred in 2011, gave the booming CRH a wake-up call. This accident killed 40 people and more than 200 people were injured. After the investigation, it was determined that the collision was caused by a design flaw and a management oversight. The direct consequence of this incident was that the CRH technology that was initially intended for export was forced to be halted. Furthermore, the government announced a new policy that the speed of CHS trains would be reduced from 350 km/h to 300 km/h for safety reasons.

In the same year, the high-speed railway group also suffered from corruption. Nearly $30 million of the high-speed railway budget was misappropriated. This was another significant hit on an already scandal-plagued CRH. From 2011 to 2017, CRH have undergone various hardships and policy changes, but over time, they have gradually stabilized.

Maturity Phase (2018 - future)
China has never had a market economy. Public service facilities including high speed railways have always been monopolised by the government. Thus, there is no significant industry competition within the sector of HSR, and consequently, the market is stable. New types of trains are being inventing simultaneously so that the CRH group can keep pace with other countries.

In 2018, the CRH returned back to speeds of 350 km/hr. Although high-speed rail has only existed in China for 10 years, its expansion rate is faster than any other countries in the same time frame. In 2020, the CRH network will cover 80% of the cities in China, and the mileage will reach 30 thousand kilometres. By 2025, the CRH mileage will be 38 thousand kilometres and by 2030, 45 thousand kilometres. It already has the largest high-speed rail network in the world, but obviously China has greater ambitions.

Quantitative
The raw data and the predicted market size for each corresponding year is shown as follow. As the HSR in China has only been existed for just 10 years since 2008. So the time scope of the data is relatively short. Table 1: The collected raw data and the market size

Define Equation:
The above data in table 1 is used to estimate a three-parameter logistic function, which is shown as follow. It is used to predict the tendency of the data.

$$S(t)=\left ( \frac{K}{1+exp(-b(t-t0))} \right )$$ (1)

Where:

·     S(t) is the status measure (mileage for each year)

·     t is time in year

·     t0 is the inflection time (year in which ½ k is achieved)

·     K is the saturation status level

·     b is a coefficient

K and b are to be estimated through the regression analysis

In addition, the equation 1 is derived into a linear form to estimate the value K, b and t0. The equations are shown are follow.

y = bX + c (2)

$$y=LN\left ( \frac{Passenger}{K-Passengers} \right )$$

Finding the value of K and b
At the beginning, the values of K were randomly assigned. But K must be ensured to be bigger than the largest value in the raw data. In this case, 28500 kilometre is the largest data, hence the initial K was set to be 28600. A total of 20 k values were listed in order to induce the k value with the biggest R square.

Through using the RSQ function, it was found k equalled 29200 would result in the largest R square. (figure 2) Furthermore, the value of b and t0 was found though the regression analysis, where t0 = intercept/(-b). A summary of the obtained value for each variable is shown in table 2. Table 2: The values of corresponding variables

S - curve
The R squared value of 0.88 suggests a mediocre fit to the curve. However, from the generated S curve, the predicted CHR mileage does not match with the actual mileage tendency in a very decent manner. There are many reasons that may cause this particular result:

1)   Lack of sufficient data. The CHR has only been operated for 10 years, so the time scope is too small to reflect a proper trend of the mileage.  In addition, the sample size is too small, any outliers will have a significant impact on the final result. For example, the 120km mileage in 2008. It is too small compares to data from other years, which imposed a large impact of the data tendency

2)   Inaccurate data. All the raw data are collected from authoritative media, but they are not official data. Especially in the case of a small sized group of data, the inaccuracy is magnified. As a result, it results mismatch between the actual mileage and the predated mileage.

3)   At the practical level, the CHS growth rate is very unusual. It increases in an exponential manner. For example, in 2009 and 2010, the mileage increased 890% and 533% respectively, compared to the previous year. Until 2011, the mileage growth rate became relatively stable. This unusual pattern differs the predicted trend from the actual trend.

In addition, a regression analysis was performed when the mileage data from 2008 and 2009 are excluded (Graph 2). The value of R was found to be 0.933 and the predict-mileage graph matched with the actual-mileage graph at a nice manner.

The birth region is defined as the first 15% percentile of the graph and the mature region is the 85% percentile. Therefore, the birth state is defined from 2008 to 2010 and the mature state is after 2017. Table 3: Birth and Mature year