The high speed railway of China: Is it really fast?

The terrible railway accident of the Chinese high-speed railway (or CRH) at Wenzhou, China, and the actions made by the railway authorities to cover up the accident have triggered massive criticisms inside and outside of China. Since last year, Mr. Kasai, the chairman of Central Japan Railway Company (JR Tokai), and Mr. Yamada, its president, have  been ardent critics of CRH, accusing them for "stealing technology", "stressing speed at the sacrifice of safety", and so on.  The Chinese side explained these criticisms were out of Japanese businesses' fear for losing their overseas customers to their Chinese rivals.
Unfortunately, Mr. Kasai's warnings have proved true. Now it is the Chinese railway industry which will lose its overseas customers.
In August 2011, within a month after the accident, I got on the CRH twice. The Chinese people did not seem to be so worried about its safety. One reason for this may be because the Chinese railway authorities decided to lower the maximum speed of the CRH. But, after experiencing the high-speed railway I think the Chinese railway authorities are too much obsessed by the speed of the train itself, taking little care about the speed of the journey as a whole.
I took a train from Shenzhen to Guangzhou. I arrived at Shenzhen station at around 3:35 pm. There were long queues in front of the ticket windows, but I managed to get my ticket at 3:45 pm. I didn't ask for a particular train number, but the girl at the window sold me a ticket for a train departing at 4:09 pm with a seat reservation. Then I went on to the line waiting for security check. (In China, you must go through security checks before you get on trains.)  But line moved very slow. It turned out that only one check machine out of two was working at the station. When I finally got in the station, the 4:09 pm train had already left, so I had to get on the train which departed Shenzhen at 4:20 pm, without seat reservation. In total, I had to spend 45 minutes at the station before the departure of the high-speed train. What is the use of high speed, when it takes so much time before getting on the train?
Compare with what you experience in Japan. When you want to get on the Japanese high-speed train, or Shinkansen, at Tokyo station, you must arrive at the station only ten minutes before the departure of the train you want to get on. You can buy your ticket either at the vending machine or at the window in a few minutes, unless you are very unlucky. So if we compare the speed of the trains themselves, then the Chinese CRH may be faster, but if we compare the speed of the whole journey, then the Japanese system will take you to your final destination more rapidly.
I want to propose the leaders of the Japanese railway industry: stop condemning the CRH. Just invite the foreign decision makers to Japan and China and let them buy their tickets by their own and experience train trips in both countries. They will realize the difference.

China's past twenty years through the eyes of a blue-collar woman

During my trip in China in August 2011, I came to know a TV drama series named "Chunnuan huakai" (Warm Spring, Flowers Bloom?). It is a life history of a woman, who begins her career at a state-owned factory as a quality inspector around 1990. She gets married with a young engineer who also works at the factory. Both of them start dreaming of living in America to open up new lives. Her husband manages to go to America, but the woman, who gets pregnant just after her husband has succeeded in getting the visa, is left in China with their son. She awaits her husband's invitation from America, but he cannot afford to invite her because he is having trouble making his own living. Then her factory cuts workforce as part of state-owned enterprise reform. She is dimissed from the factory in return for a lumpsum pension. She searches for a new job for some years and ends up becoming a bus conductor. Her mother gets angry because she thinks that a bus conductor is not a respectable job.
That is what happens until the 8th episode. I don't know what happens in the following 25 episodes, but it seems that she will become an entrepreneurs, divorces her husband and gets married with another guy.
Anyway, this drama series shows what has happened in the urban sector of China during the past twenty years through the eyes of an ordinary working-class woman. It shows what I have witnessed and reported as an observer of China.
I am looking forward to watching the rest of the series.

The Maglev Line connecting Tokyo and Osaka--a project that is doomed to fail

On May 27th, the Japanese government instructed JR Tokai to construct the Tokyo to Osaka maglev line. This train will link Tokyo and Nagoya in 40 minites, Tokyo and Osaka in 57 minutes, running at a maximum speed of 505 kph.
But do we really need such a train?
The present shinkansen runs every 5 minutes or so between Tokyo and Osaka. Booking a ticket is usually very easy. Besides, there are flights between the two cities every half an hour. Why do we need another line to connect the already well-connected two cities?
The maglev line is expected to start operation in 2045. In that year, Japan will have 10 million people less than it has today. Besides this, the Japanese population is aging. In 2045 we will have more elderly people who may not be willing to travel as much as younger people.
Every time I get on the shinkansen on weekdays, I find the train filled with business people who seem to have little reason to waste their time and money travelling between Tokyo and Osaka. The number of business people that travel between Tokyo and Osaka is far greater than the number of business people travelling between New York and Chicago, or Beijing and Shanghai. Japanese companies can not afford to be so generous to useless business trips in the future. Therefore, when the maglev line starts operating, it is very likely that the shinkansen will be far less crowded than it is today.

To let the train run at a very high speed, the maglev line must be very straight. This requires the line to run through the Southern Japanese "Alps" and other mountainous regions, piercing through the mountains with long long tunnels. It will be like a super-speed subway. The prefectures that lie between Tokyo and Nagoya expect that the maglev train to stop at the stations built in each prefecture. But it is very likely that only a few trains will stop at these stations, because the regions which the maglev train runs through are sparsely populated. In order to connect Tokyo and Nagoya in 40 minutes the train cannot stop at stations between them. I don't understand why the prefectures between Tokyo and Nagoya do not oppose the construction of maglev train. It will ruin their beautiful landscape without providing any convenience or economic gains to their people.

The maglev train consumes a lot of electricity, but electricity may be more expensive than today in 2045, because it is likely that only a few nuclear power plants will be operating then, and more renewable energy will be used. With fewer passengers than expectation and more electricity expenses, the maglev train is doomed to fail. So why not stop the waste and expenses now?

Tax electricity consumption and raise money for relief

Because of the breakdown of Fukushima Daiichi Nuclear Power Plant caused by the big earthquake and tsunami, electricity supply in the Tokyo metropolitan area is in shortage. The so-called "planned blackouts" have been implemented almost every day in various parts of the area. Because there is no hope for the nuclear power plants to recover, and because it will take time to build alternative sources of electricity, the Tokyo metropolitan area will suffer power shortage for many months in the future. The government is calling for efforts to save electricity, and many companies and institutions, including the one that I work for, have stopped using the heating system and turned off redundant lights.
However, on my way home on the day when the Minister of Economy, Trade, and Industry called for more efforts to save electricity, I saw many stores that ignored the call and kept on lighting their luxurious lights as if nothing had ever happened. Simply calling for the people's consciousness to save electricity is not enough, because there is no way to force the people who lack consciousness to save electricity.
The "planned blackouts" have shown us how deeply our daily lives depend on electricity supply. Several traffic accidents are reported that are believed to be triggered by the blackout of traffic signals. Frequent blackouts will severely damage people's daily lives and productive activities. We need to consider a way to suppress electricity demand, rather than simply turning off the switch.
I think all economists agree that the best way to balance supply and demand when demand exceeds supply is to raise the price. Even those who have no intension to change their lives will be given the incentive to save electricity. At this moment, however, if TEPCO (Tokyo Electricity Power Company) raises prices, it will trigger public anger against the company. But if the government levies a temporary tax on electricity consumption, pursuading the public that the collected tax will be used for the relief of the people living in the area struck by the earthquake and tsunami, I think people will support such proposal.

Comments on Ian Bremmer, The End of the Free Market, Portfolio, 2010

This book puts forward an attractive notion to describe the type of capitalism which is different from western free-market capitalism. That is "state capitalism". China, Russia, Saudi Arabia, and UAE are the countries which the author depicts as the champions of state capitalism. State capitalism is a type of market economy in which private enterprises play important roles but the government is heavily involved in the market to achieve political goals. I learned a lot about the oil-rich countries of middle east from this book. However, I found some misleading parts in this book regarding Japan and China. The author writes that "(MITI) produced most of Japan's prime ministers", but as far as I know none of the postwar prime ministers had served as a bureaucrat at MITI, with the exception of Nobusuke Kishi, who was a bureaucrat at the Ministry of Commerce and Industry (Shokosho), the predecessor of MITI. The author's description on China's virtual monopoly of global rare earths production, saying that "The Chinese government has accomplished this by investing billions in mines and processing at home", is also misleading. According to books and articles on rare earths published in China, it is obvious that China's monopoly has been accomplished not because the government made efforts to do so but because the government has had only loose control on rare earths resources. The government intends to strengthen the control over rare earth mines and restrict production and exports, in order to preserve the resources. But many private miners entered the business of rare earths extraction, increasing the production volume, and driving the price down, forcing rare earth mines outside of China to stop production, and leading to China's monopoly. This is a kind of development that is against the will of the Chinese government.

business as usual?

This morning I came to my office almost at the same time as usual. The commuting trains were operating normally, and, to my surprise, they were less crowded than usual. An European journalist called me last night, saying that he was a little surprised by the calmness of the people in Tokyo. Maybe that's true, except for the fact that stores are running short of food, batteries, and daily necessities and there are long queues of cars in front of gasoline stations waiting for putting fuel in their tanks.
The DVD recorder at my office went out of order, perhaps because of the earthquake, and yesterday I made telephone calls to the retailer and the manufacturer (Panasonic) service station. They were working as effeciently as usual. This morning I contacted a book seller to buy some books and he was at the office working as usual. Business is quite normal here in Tokyo, except for a sense of anxiety to the nuclear power plant accident which is still in progress.

a forced eco-friendly life

After the 1st nuclear power plant of Fukushima exploded the day before yesterday, the 3rd plant blasted just an hour ago. Tokyo relies its electricity supply on these plants in Fukushima, so it is forecast that the power supply in Tokyo in the coming days (or, perhaps, weeks) will be limited considerably.
This morning I went to the railroad station, but I had to give up going anywhere because there was a long queue in front of the entrance waiting to be allowed to enter the station, where the train arrives only occasionally. It is amazing that so many people still think that they need to go to their jobs even under this circumstance. Isn't it a good reason to stay at home and have a rest?
I decided to stay at home and lead a forced ecology-friendly life. I can make a net contribution to the energy shortage because my house is equipped with a solar power plant which, during sunny days, can not only supply enough electricity which my family needs but also provide redundant electricity to the power grid.

a devastating earthquake in northeastern Japan

Yesterday, when I was in my office, the building started to shake slowly, and soon the shake became intense. Thinking that the building might have some trouble I nearly panicked. Some files of brochures fell down from the bookshelf but the building itself seemed to have no trouble, thanks to the enforcement work completed last year. All of the subways and railways were out of operation during the whole afternoon. I ran and walked home. It took me two hours to arrive at my house in Ogikubo. Because the roads were crowded all the way, it seemed that walking was the fastest way to get back home.
Even with the severe shake, most of the houses and buildings I saw on the way home stayed intact, except for some facades of old houses that crumbled. The photo shows the biggest collapse I saw on my way home. It is a stone wall of a graveyard near Shinjuku. Most of the houses and buildings and even the construction sites in Tokyo had been well prepared for earthquakes. Up to the moment of writing, 4 people are reported dead in Tokyo. The casualties in the northeastern part of Japan, however, are reported to be very heavy. The death toll already reached 700, and it will perhaps exceed 1000. Most died because of the dreadful Tsunami.
Electricity and water supply remain normal in Tokyo. Many people have rushed to the stores to hoard food. It is necessary to stay calm at this moment.

How many automobile manufacturers are there in China?

It is a widely known fact that China has more automobile manufacturers than any other country in the world. But the exact number of manufacturers is not a figure that is readily available. The "China Automobile Industry Yearbook" reports that there were 115 automobile manufacturers in 2009, and the figure was almost flat since 1998, when there were 119. But we can name quite a few new entrants that entered the market after 1998, such as Beijing Hyundai, Tianjin Toyota, Guangzhou Toyota..to name but a few. Furthermore, when we count the manufacturers which produced more than one vehicle in 2009 that are reported in the Yearbook, it exceeds 115.
Using the raw data on automobile production gathered by China Automobile Technology Research Center (CATARC), which compiles the Yearbook, I counted the number of manufacturers one by one. To be honest, even this Center, a half-governmental body which has a strong influence on automobile manufacturers in China, does not necessarily collect the data of all the manufacturers that exist in China. The data, however, show that there were 146 manufacturers in 2009, far more than the figure reported in the Yearbook. 146 is a figure that does not include the holding companies of automobile industrial groups. The figure only includes the firms which have legal person status. Those companies which do have independent legal person status but in reality can be regarded as a factory of other companies, such as Toyota Kyushu of Toyota, are also counted in my calculation. Therefore, among the 146 firms, many are not regarded as indendent players, but in any case, the total number of manufacturers increased from 135 in 2001 to 155 in 2007, and thereafter started to decrease slowly.

Growth Projection of the Chinese Automobile Market

On Feb 14, I went to Ohta City of Gunma Prefecture to give a public lecture on the Chinese automobile industry. Why are these people at Ohta interested in Chinese automobile industry? It is because Fuji Heavy Industries Ltd., a Japanese car maker which has its main car plant in Ohta, is now negotiating with Chery Automobile about establishing a joint venture in Dalian, China, to produce Subaru-brand cars there. The suppliers which are supplying parts to Subaru need to consider whether to follow Subaru and produce parts for the Dalian car plant or not.
China has become the biggest automobile market in the world since 2009. In 2010 alone, 18.5 million vehicles were sold. China's rise to the top position was precipitated by the sharp decline of US auto market after the financial crisis, but I think China will continue to be the largest in the world in the future.

How many automobiles will be sold every year? Growth projections of the Chinese automobile market always fail. In 1993, the Chinese State Planning Commission asked experts to estimate the size of the market in 2000. Their answer was 2.5 to 3 million units. But the actual sales volume in 2000 was only 2 million. In 2001, the State Economy and Trade Commission estimated that the sales volume in 2005 would be 3.1 to 3.5 million. But the actual sales volume in 2005 was 5.7 million. The history of failed estimates makes me think that there is no difference between sophisticated models and rude models--both are destined to be wrong anyway.

The following is my rude projection: according to my estimation, during the period of 2001-2009, 4.9 percent of the existing stock of automobiles was replaced by new automobiles. In 2010, 3 million units were bought as replacement of existing automobiles, while 15 million units were bought as new addition to the existing stock. Suppose that the amount of new addition will stay at the level of 2010--15 million. The pink line in the figure shows the amount of sales for newly-added demand. Replacement demand will grow, because the stock of automobiles will continue to grow. The blue line in the figure shows total demand, so the gap between the two lines is the demand for replacement.

According to this conservative projection, the size of the market in 2020 will be 26 million units, and that of 2030 will be 34 million.

The reason I took a rather pessimistic view for the new addition is because from January 2011 Beijing City started restricting the number of new issues of number plates. It is reported that new issues in Beijing will be reduced from 750 thousand in 2010 to only 240 thousand in 2011. This means that automobile sales will be reduced by half a million units by Beijing's restriction. Shanghai has already introduced similar restrictions in 1994. Because traffic jam is becoming a serious problem in many other cities, it is likely that some other cities will follow suit. The demand for automobiles may be severely suppressed by such restrictions in the richest cities in China.

(I will continue writing my views on Chinese automobile industry in my following posts.)

The launch of Guoxin Holdings

According to 21st Century Business Herald dated December 23, 2010, the Chinese government established Guoxin Holdings, a state-owned enterprise managed by the central government, in December 2010. The role of the company is "to clean up the central SOEs' assets and help reduce the number of central SOEs to 80-100." The company is called the "sweeper of central SOEs." This is an interesting development of China's alleged "state capitalism."