VZCZCXRO5027
RR RUEHCN RUEHVC
DE RUEHGH #0372/01 2480845
ZNR UUUUU ZZH
R 040845Z SEP 08
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 7121
INFO RUEHOO/CHINA POSTS COLLECTIVE
RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHGH/AMCONSUL SHANGHAI 7702

UNCLAS SECTION 01 OF 03 SHANGHAI 000372 
 
SENSITIVE 
SIPDIS 
 
STATE ALSO FOR EAP/CM, EEB/TRA 
TREASURY FOR OASIA - DOHNER, HAARSAGER, CUSHMAN 
TRANSPORTATION FOR BERNESTINE ALLEN/NICOLE PORTER 
TRANSPORTATION FOR DAS JOEL SZABAT/DAS SUSAN MCDERMOTT 
USDOC FOR ITA MAC DAS KASOFF, MELCHER 
 
E.O. 12958: N/A 
TAGS: ELTN PGOV ETRD EINV ECIN CH
SUBJECT: HIGH SPEED RAIL FURTHER INTEGRATES EAST CHINA 
 
REF: A) SHANGHAI 18, B) SHANGHAI 19 
 
SHANGHAI 00000372  001.2 OF 003 
 
 
¶1.  (SBU) Summary:   Over the past year, East China has embarked 
on a quest for further intra-regional connectivity and economic 
integration through faster passenger rail transport.  On July 
15, Shanghai and Zhejiang Province announced plans for a new 
high-speed rail link that will connect Hangzhou, the provincial 
capital, with Shanghai.  On August 18, the Zhejiang Provincial 
Government announced it planned to commence construction of the 
Shanghai-Hangzhou Magnetic Levitation (Maglev) line, which will 
shorten the trip to 25 minutes.  A subsequent announcement by 
the Hangzhou Mayor on September 2 clarified that there is no 
timetable for the Maglev extension, given the high-speed railway 
between the two cities would perform similar functions, but 
local governments are still committed to the project.  Shanghai 
is also planning to extend the current Maglev line to Shanghai's 
Hongqiao Airport in time for the World Expo in 2010.  Earlier in 
2008, Shanghai's decision to extend the Maglev train caused a 
dust-up among local residents worried about the impact of the 
extension on the property values of their apartments and also on 
their health (reftels).  Besides these advanced technology 
trains, other fast train lines are proliferating in the region. 
 
 
High Speed Railway Link 
----------------------- 
 
¶2. (U) According to Chinese media, the Minister of Railways 
plans to construct a new high-speed railway between Shanghai and 
Hangzhou that will commence next year and be completed by 2013. 
The 158-kilometer line is slated to link the Hangzhou Eastern 
Railway Station with Shanghai's Hongqiao transport hub, 
currently under construction adjacent to Hongqiao Airport.  The 
line will reduce traveling time to just 30 minutes (currently 1 
hour and 45 minutes).  The peak speed for the train will be over 
300 kilometers per hour (186 miles per hour) and total 
construction cost is estimated at USD 4 billion.  There will be 
five stops along the line: Yuhang, Tongxiang, Jiaxing, 
Shanghai's Songjiang District and Fengjing Town.  The 
Shanghai-Hangzhou link is planned to connect to the 
Shanghai-Beijing high speed railway line currently being 
planned.  In Hangzhou, passengers would also be able to transfer 
to the Hangzhou-Ningbo railway line.  Ningbo is Zhejiang 
Province's largest seaport and home to 5.6 million residents. 
 
¶3.  (U) On July 1, 2008, construction of the high-speed railway 
between Shanghai and Nanjing, capital of Jiangsu Province and 
home to 7.7 million residents, also got under way.  The total 
length of this high-speed railway will be 300 kilometers with 
the peak speed reaching 250 kilometers per hour.  Total 
investment on the project will be RMB 40 (USD 5.8) billion.  The 
Ministry of Railways will finance the project, which is 
scheduled to be completed before the 2010 Shanghai World Expo. 
(Shanghai officials predict attendance at the six-month 2010 
Shanghai World Expo will be sixty million persons, of which 
fifty million will be domestic visitors.)  After the completion 
of this railway, travel time between Shanghai and Nanjing will 
be reduced from 2 hour and 20 minutes to 1 hour; travel time 
between Shanghai to Suzhou (population 6.2 million) in eastern 
Jiangsu Province will be reduced from 37 minutes to 15 minutes. 
During peak times, there will be one train every 3 minutes to 
facilitate the transportation between the two cities.  There 
will be 21 stops along the line and experts predict the 
completion of this railway will benefit business in the smaller 
cities along the line.  The overall capacity for this railway 
between Shanghai and Nanjing is estimated at 68 million people 
annually. 
 
Part of the Bigger Picture 
-------------------------- 
 
¶4.  (U) The high-speed rail project is part of a bigger plan to 
link East China with Beijing.  According to media reports, 
construction on the Shanghai-Beijing high speed rail link began 
on January 18, 2008.  Upon completion in 2014, the travel time 
between the Chinese capital and the nation's commercial center 
will be reduced from ten hours to five.  It will also double the 
existing annual transport capacity to 160 million passengers. 
The Beijing-Shanghai High Speed Railway will be 1,318 kilometers 
(820 miles) in length, and 21 stations will be set up along the 
line.  The peak speed for the train will be 350 kilometers per 
hour.  It is also projected that during peak hours, trains will 
depart every five minutes.  The total cost of building this high 
speed railway is estimated at USD 21 billion, China's second 
 
SHANGHAI 00000372  002.2 OF 003 
 
 
biggest project behind the Three Gorges Dam.  The projected 
one-way train ticket price will be between RMB 600-800 (USD 
88-117).  Upon completion, the Shanghai-Beijing High Speed 
Railway is expected to carry 80 million passengers per year. 
Currently in China, these are the only two proposed high speed 
railway projects:  Shanghai-Beijing and Shanghai-Hangzhou. 
 
¶5. (SBU) Experts noted that the Beijing to Shanghai High-Speed 
Railway will bring tremendous business opportunities to China as 
well.  Over 80 percent of railcars will be purchased from 
domestic companies as part of China's long-term home-grown 
technology plan.  Experts also expect the large passenger volume 
on the line to help the project breakeven within eight years. 
Once the project is completed, the cities along the 
Beijing-Shanghai corridor will likely attract additional 
investment.  According to a SinoPac Securities transportation 
analyst, China's massive investment in the railway 
infrastructure construction just started and will continue over 
the next 10 years.  To emphasize the point, he said that public 
railway construction investment increased 29 percent in the 
first 6 months of 2008, reaching USD 11.6 billion.  This 
occurred against the backdrop of a moderate increase in total 
infrastructure investment by the Central Government. 
 
Maglev Construction on the Slow Track 
-------------------------------------- 
 
¶6.  (U) On August 18, the Zhejiang Provincial Government 
announced it would commence construction of the 
Shanghai-Hangzhou Maglev line and would cost RMB 22 billion (USD 
3.2 billion).  The provincial office supervising the Maglev 
project said it would finish preliminary work of site selection 
and environmental evaluation this year.  With the extension to 
Hangzhou, the total length of the Maglev line will be 
approximately 200 kilometers (124 miles), including the section 
that links Shanghai's two international airports.  However, on 
September 2, Mayor of Hangzhou Cai Qi clarified that the there 
is no timetable for the Maglev extension, given the high-speed 
railway between the two cities would perform a similar function. 
 Mayor Cai told the media that the "The Maglev project has the 
backing of the Shanghai, Hangzhou and Zhejiang governments and 
is unlikely to be built in the same time frame as the high-speed 
railway project, but it will definitely go ahead."  The Maglev 
extension through the city of Shanghai appears to be on track to 
be completed before the 2010 World Expo.  In early 2008, the 
planned expansion touched off numerous protests by Shanghai 
residents concerned about electromagnetic radiation emitted from 
the Maglev and the impact of the Maglev on the property value of 
their houses.  City officials claim they have rerouted part of 
the planned extension in response to residents' concerns. 
 
Maglev vs. High-Speed Rail 
-------------------------- 
 
¶7.  (U) The proposed high speed railway link has a few 
advantages over the Maglev.  First, the high speed rail track 
can easily integrate with the existing rail track, which the 
Maglev is unable to do.  Second, the Maglev's construction cost 
is twice as much as high speed rail and operation cost is nine 
fold.  In order to break even, the Maglev will charge a hefty 
ticket price, which is difficult for the average Chinese citizen 
to bear.  High speed rail is also more environmentally friendly 
than the Maglev in terms of noise and radiation.  Additionally, 
the Maglev travel time to Hangzhou will be 25 minutes, only 5 
minutes faster than the high speed rail.  (Comment:  Some 
speculate that Zhejiang's announcement to build a Maglev railway 
link to Shanghai is nothing more than an effort to save face. 
The plan was one of Zhejiang's top priorities in the past and it 
appears to be difficult for provincial leaders to give it up. 
The Maglev extension was initially side-lined after Shanghai 
Party Secretary Chen Liangyu fell from power in October 2006 and 
was roundly criticized for such extravagant projects.  Now that 
the political crisis has passed, officials seem more willing to 
pursue the Maglev project once again.  End comment.) 
 
Other Fast Trains Also Proliferating 
------------------------------------ 
 
¶8.  (U) Since April, 2007, when the Ministry of Railways 
increased permitted train speeds, fast trains around East China 
have blossomed.  The so-called "D Train" train speed has been 
increased from 160 kilometers per hour to 200 kilometers per 
hour.  With the new "D Train", the travel times between Shanghai 
 
SHANGHAI 00000372  003.2 OF 003 
 
 
and elsewhere within the Yangtze River Delta have dropped 
significantly.  For example, the travel time between Shanghai 
and Nanjing was reduced to just 2 hour and 20 minutes 
(previously close to 3 hours), Suzhou now only takes 37 minutes 
(previously 55 minutes), and Hefei (Anhui Province) now only 
takes 3 hours. (previously over 7 hours).  Although the "D 
Train" is fast, it is still different from the High Speed 
Railway, which is based on a combination of advanced railway 
technology and railcars.  The "D Train" is based on locomotive 
technology and uses regular track. 
 
¶9.  (SBU) Comment:  In the past, East China, as with the rest of 
China, failed to adequately develop its rail system.   As a 
consequence, the rail infrastructure had largely been incapable 
of meeting the demands placed on it by the booming economy, 
whether for moving coal for power generation, other freight or 
millions of passengers daily.  East China's dramatic 
improvements in highway networks and aviation means the rail 
system no longer occupies as central a role in the region's 
transportation network, even if inadequate in that earlier role. 
 Now East China's passenger rail system is scrambling to catch 
up.  Based on media statistics, the total annual passenger 
volume in the Yangtze Delta Region will reach 3.05 billion 
passengers by 2010 and 5.5 billion passengers by 2020.  The 
area's move to boost rail connectivity will bring the railway 
system back into greater relevance and diminish bottlenecks in 
passenger movement.  End Comment. 
JARRETT