China Orders High-Speed Rail Review, Fires Officials After Crash Kills 39

China ordered a two-month inspection of rail safety and fired three officials after 39 people were killed in a high-speed train crash three days ago.

“We should have a thorough inspection and rectify any possible safety issues,” Rail Minister Sheng Guangzu said in a statement on the ministry’s website yesterday. The official Xinhua News Agency said two American citizens were among the 39 dead. The news service said the toll had increased to 40, then retracted the report, saying a traffic accident victim’s death had been mistakenly included in the higher tally.

CSR Corp., the nation’s biggest trainmaker by market value, fell the most in almost three years in Shanghai trading, while China Eastern Airlines Corp. and China Southern Airlines Co. rose on speculation the accident may damp high-speed rail investments. China has built the world’s biggest high-speed rail network in less than five years, luring travelers from planes.

“China is building too quickly,” Zhao Jian, a professor of economics at Beijing Jiaotong University, said by telephone on July 24. “The result is this kind of accident.”

In the disaster, a bullet train that had broken down after being struck by lightning was rear-ended by another locomotive, Xinhua said. The crash, which pushed four coaches off a viaduct, injured about 192 people, according to the rail ministry.

One of the trains was running from Hangzhou to Fuzhou, the capital of Fujian province on the coast, and the other was heading from Beijing to Fuzhou, Xinhua said. There were more than 1,400 passengers on board, the agency said, citing Zhao Yide, the mayor of Wenzhou.

CSR Slumps

CSR fell 8.9 percent to 6.04 yuan in Shanghai trading yesterday, the biggest decline since August 2008. In Hong Kong, it tumbled 14 percent to HK$5.98, the lowest in more than one year. Rival China CNR Corp. dropped 9.7 percent in Shanghai to 5.87 yuan.

CSR, based in Beijing, made one of the trains involved in the crash while the other was built by the company’s venture with Bombardier Inc., a press officer for the Chinese company, who only gave her surname, Li, said by phone yesterday. Bombardier’s Beijing-based spokeswoman Flora Long said she was unable to comment because she was traveling. Calls to the Canadian company’s office in the city went unanswered.

After the crash, Long Jing was fired as head of the Shanghai Railway Bureau, along with deputy chief He Shengli and Li Jia, the head of the bureau’s committee of the Communist Party of China, Xinhua said, citing the rail ministry. The Shanghai bureau oversees rail operations in the area of the crash.

Wang Yongping, a spokesman for the ministry, bowed to apologize for the crash at a televised press conference July 24.

Beijing-Shanghai Disruptions

The collision is the latest setback for China’s bullet- train program. The $34 billion Beijing-Shanghai high-speed rail line, the world’s longest, has suffered major delays from storm- related electrical breakdowns at least three times since it opened on June 30.

“In so many areas, there is the lack of an adequately trained -- and perhaps more importantly, experienced -- workforce, along with tried-and-tested management oversight at the operational level,” Bill Barron, a visiting scholar at the Division of Environment at Hong Kong University of Science and Technology, said in an e-mail. “Given the pace of expansion, how could there be?”

China Southern, the nation’s biggest domestic carrier, gained 3.4 percent to close at HK$5.17 in Hong Kong, and China Eastern climbed 4.8 percent.

Bombardier

Bombardier is among overseas companies that have benefited since China introduced its first high-speed track in 2007. China plans to have 16,000 kilometers (9,944 miles) of such lines by 2015, the government said in January.

Bombardier won a $4 billion contract in September 2009 to build 80 high-speed passenger cars with China South Locomotive & Rolling Stock Corp. The company said in July last year its venture with CSR, Bombardier Sifang Qingdao Transportation Ltd., won an order for additional 40 high speed trains.

In addition to technical faults, China’s spending on its railways has generated accusations of graft.

Liu Zhijun, an advocate of bullet trains, was fired as railway minister in February for “severe” disciplinary violations as part of a corruption probe, Xinhua said. Su Shunhu, deputy chief of the transportation bureau of the Ministry of Railways, is under investigation on suspicion of taking bribes, the 21st Century Business Herald reported on July 22, citing an unidentified ministry official.

“I don’t think China should develop this high-speed, high- cost system,” Jiaotong University’s Zhao said. “The last railway minister did not follow any scientific development approach and this is the result. This is not only a technical problem but a management problem.”

To contact the reporters on this story: Frederik Balfour in Hong Kong at fbalfour@bloomberg.net; Jasmine Wang in Hong Kong at jwang513@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

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