China Says Design Failure, Mismanagement Caused July High-Speed Rail Crash

China punished 54 officials and ordered the railway ministry to improve management of its high- speed rail system after a government investigation found a fatal train crash was caused by mismanagement and design flaws.

Former railway minister Liu Zhijun and Zhang Shuguang, former deputy chief engineer at the ministry, are among those most responsible for the July 23 accident, according to the report issued by the State Council today. Liu and Zhang were removed before the crash earlier this year over “serious violations of laws and discipline,” it said.

Those found responsible will either be disciplined by the Communist Party or removed from their posts, according to the report, which also criticized the government’s handling of the rescue effort and cleanup. The accident raised concerns over the showcase high-speed rail network’s safety amid its rapid expansion and triggered public outrage.

“The red-hot boom days we saw before may be gone now,” said Simon Zhang, a Beijing-based senior consultant with Lloyd’s Register. The punishments are a deterrent that “will reduce the possibility that future railway construction will be rushed to meet deadlines at the expense of safety.”

Stocks Fall

China raliway stocks slumped today before the report came out, after the China Daily newspaper on Dec. 24 quoted Railway Minister Sheng Guangzu as saying the ministry will reduce spending on railway construction to 400 billion yuan ($63.2 billion) next year, a cut of about 15 percent. China Railway Group (390) fell 8.5 percent to HK$2.37, while China Railway Construction Corp. (1186) fell 5.4 percent, the most since Nov. 25.

The accident happened near the city of Wenzhou when a train rammed into a stopped locomotive, pushing four carriages off a viaduct. A lightning strike had caused signaling equipment to malfunction, according to today’s statement.

The report’s findings were similar to a preliminary investigation by the Shanghai Railway Bureau released after the crash that also blamed a signaling system design flaw.

The State Council also called for safety checks on other sites, including coal mines, roads and bridges in the days after the crash.

The railway ministry and the Shanghai railway bureau released information in an untimely way and didn’t respond properly to concerns about the rescue operation, according to the statement.

Baby Found

Authorities were criticized on China’s microblog services after a 2-year-old was discovered alive in the wreckage hours after the accident and cleanup crews buried one of the trains. Microbloggers asked whether the baby’s parents and others could have been saved had the rescue effort reportedly not been called off about six hours after the accident.

The government has already reduced the speed of bullet trains, delayed new projects and fired three Shanghai rail officials following the crash. The rail ministry also recalled at least 54 high-speed trains.

China’s rail network is set to reach 120,000 kilometers (74,500 miles) under a 2.8 trillion yuan ($443 billion), five- year investment plan running through 2015. That includes boosting the high-speed network, which opened in 2007, to 16,000 kilometers.

Rail construction spending was estimated at 469 billion yuan in 2011 and 709 billion yuan in 2010, the Daily said.

The high-speed train system was pushed forward by former minister Liu until he was removed during a bribery investigation in February, according to state-run Xinhua News.

Even while it administered punishment, the State Council affirmed that China was correct to push ahead with expanding high-speed rail projects.

“The high-speed railways improved people’s transportation and boosted economic development,” it said. “The direction of development and construction of high-speed railway is correct.”

To contact Bloomberg News staff for this story: Zheng Lifei in Beijing at lzheng32@bloomberg.net

To contact the editor responsible for this story: Vipin Nair at vnair12@bloomberg.net

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