China started its 2,298-kilometer (1,428-mile) high-speed train line, the longest in the world, as the nation boosts investment in rail networks, intensifying competition for airlines.
The first train on the Beijing-Guangzhou line left Beijing West Station at 9 a.m. as scheduled, according to state broadcaster China Central Television. The trains will initially run at a speed of 300 kilometers per hour, reducing the travel time to as few as eight hours from the previous 21 hours, according to the rail ministry.
The new line, which will eventually connect to Hong Kong, is part of the nation’s plan to build a 16,000-kilometer high- speed rail network by 2015, undeterred by a deadly bullet-train accident last year. The new service may lure air travelers and prompt China Southern Airlines Co. (1055) and Air China Ltd. (601111) to cut fares, according to Barclays Plc.
“The continued development of the high-speed train network will marginalize short-haul domestic air routes,” Barclays analysts Patrick Xu and Jon Windham wrote in a note to clients last week. It will “exacerbate the competition on long-haul domestic routes and depress margins.”
China has increased spending on rail projects this year as the government sought to revive growth in the world’s second- biggest economy. The National Development and Reform Commission, the nation’s top economic planner, earlier this month approved a 63.7 billion-yuan ($10 billion) subway construction plan in Changsha city, Hunan province.
In September, the agency approved subway projects in 18 cities, inter-city rail projects and road construction plans. Rail construction had slowed last year after 40 people were killed in a bullet-train crash near the eastern city of Wenzhou.
“China’s central government invested a lot this year in rail to revive economic growth,” said James Chung, a Shanghai- based analyst at Masterlink Securities Corp. (2856) “Fixed-asset investment can boost growth quickly.”
The line linking capital Beijing with Pearl River Delta’s Guangzhou goes through five provinces from the north to the south. It also connects to the existing high-speed rail lines including Beijing-Shanghai and Guangzhou-Shenzhen, according to the Ministry of Railways.
The fastest bullet-train on the new line has ticket prices starting from 865 yuan ($139), about 73 percent of the lowest air fare on the route, Barclays said Dec. 21.
For Dec. 26 flights between Beijing and Wuhan, a key destination on the line, China Southern offered a discount of as much as 53 percent, according to Ctrip.com, the country’s biggest travel portal. Air China gave a 50 percent discount on that day, the website showed Dec. 24.
The Beijing-Guangzhou line will also step up competition for China Southern’s Airbus SAS A380 superjumbo services between the cities, an about three-hour flight. High-speed train services in China have lured travelers from flights that often suffer delays because of airspace restrictions and poor weather.
The nation’s carriers flew 267.5 million passengers in the first ten months of 2012, 9 percent more than a year earlier, according to data by the aviation regulator. Nationwide rail passengers rose 4.6 percent to 1.7 billion through November, according to the rail ministry. It didn’t provide passenger numbers for high-speed railways.
In Hong Kong, about 8,000 workers are engaged in the construction of a HK$66.9 billion ($8.6 billion) 26-kilometer underground railway, which will run from downtown Hong Kong to the Chinese border and connect to the Beijing-Guangzhou line, builder MTR Corp (66) said.
Piling of the underground West Kowloon Terminus has been completed. Excavation and tunneling works are in progress, MTR, the city’s subway operator, said in an e-mailed statement. The Hong Kong section of the express rail link, expected to be completed in 2015, may carry about 99,000 passengers a day in 2016, it said.
The 11-hectare terminus, which will have customs and immigration facilities, is located next to the city’s tallest building International Commerce Centre. It is also in the vicinity of the planned West Kowloon Cultural District, an airport express station and a subway station.
The link “will facilitate the social and economic integration of Hong Kong with cities in the Pearl River Delta as well as other major cities in the mainland,” MTR said. It “will enhance Hong Kong’s position as a regional hub.”
China’s Ministry of Railways didn’t publish a total investment amount for the new high-speed line because it was developed in parts and then connected. The Wuhan-Guangzhou section, which extends 1,069 kilometers and began operating a year ago, cost 116.6 billion yuan.
Another landmark Chinese high-speed railway, the 1,318- kilometer Beijing to Shanghai link that started operating in June 2011, cost 220.9 billion yuan.
The ministry said the Beijing-Guangzhou line is “one of the most sophisticated high-speed railways” in the country. Disaster prevention and monitoring systems have been strengthened and a risk control system has been set up to ensure the network’s safety, it said.
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