China’s high-speed rail (HSR) network, a marvel of modern engineering, spans over 48,000 kilometers as of 2025, dwarfing all other global rail systems combined. It has transformed domestic travel, connecting major cities with unprecedented speed and efficiency. However, beneath this achievement lies a growing financial crisis.
The China State Railway Group (China Railway), the state-owned operator, has accumulated a staggering debt of approximately 6.2 trillion yuan (around $863 billion USD) by the end of 2024, equivalent to roughly 5% of China’s GDP.
China’s HSR network, which began with the Wuhan-Guangzhou line in 2009, has grown at an extraordinary pace. By 2021, it covered 40,000 kilometers, connecting 93% of cities with populations over 500,000. The government aims to expand this to 50,000 kilometers by 2025 and 70,000 kilometers by 2035—a 70% increase from 2021 levels. This aggressive expansion, driven by the goal of stimulating economic growth post the 2008 global financial crisis and the COVID-19 pandemic, has prioritized scale over financial sustainability.
Regional governments have fueled this expansion, competing to secure HSR projects to boost local economies, create jobs, and foster related industries. This competition has led to the construction of lines in areas with low passenger demand, resulting in underutilized routes. For instance, the Lanzhou-Urumqi line has a transportation density of just 2.3 million passenger-kilometers, compared to 48 million for the Beijing-Shanghai corridor, highlighting stark disparities in operational efficiency.
Each kilometer of HSR costs between 120 million and 130 million yuan to build, meaning a 30,000-kilometer expansion could require approximately 3.6 trillion yuan. These costs are exacerbated by challenging terrains, such as the Hotan-Ruoqiang railroad in the Taklamakan Desert, and the prioritization of advanced technologies like maglev trains capable of 600 km/h. Such projects, while showcasing technological prowess, significantly inflate expenses.
China Railway finances its expansion primarily through bonds sold to state-owned banks and brokerages, a practice that keeps borrowing off the official national debt ledger, creating a “hidden debt.” In 2021, total liabilities reached 5.91 trillion yuan, and by 2024, this figure had climbed to 6.2 trillion yuan.
Economic stimulus measures, such as the 300 billion yuan in railway construction bonds issued in May 2022, have further deepened this debt trap. This approach allows the government to fund infrastructure without increasing reported national debt, but it places immense pressure on China Railway’s balance sheet.
Many HSR lines rely on government subsidies to remain operational, as passenger fares alone cannot cover capital and operating costs. In 2018, over 60% of HSR operators reported losses exceeding $100 million, with the Chengdu operator losing $1.8 billion. These subsidies, combined with the need to raise new debt to service old debt, have created a vicious cycle, as warned by transport economists.
The China Railway Development Fund (RDF), established in 2014 to attract private investment, promised steady returns but has struggled to deliver. By 2020, bond yields dropped from 5.78% to 3.97%, and the fund was liquidated early to avoid dividend payments, further eroding investor confidence. This reflects the broader challenge of achieving financial returns on HSR projects with low ridership.
The HSR network’s financial viability hinges on passenger fares, but ridership has not met expectations on many lines. In 2021, passenger numbers were down 29% from pre-pandemic levels at 2.53 billion, impacted by COVID-19 restrictions and economic slowdowns. Stations like Yizhuang and Dandong have become “ghost stations,” with minimal daily passengers, failing to attract anticipated economic activity.
High ticket prices exclude a significant portion of China’s population, particularly low-income groups. Research from Chongqing Jiaotong University indicates that about 25% of Chinese people avoid HSR due to cost, exacerbating social inequity. A fare hike of up to 40% in 2024, implemented to offset operating losses, has further reduced accessibility, potentially worsening ridership and fueling public discontent amid inflation and wage stagnation.
HSR lines are designed primarily for passengers, moving at speeds unsuitable for heavy freight. This focus has neglected conventional rail systems, which are critical for freight transport. As a result, China has increasingly relied on road freight, increasing environmental costs and undermining the HSR’s sustainability claims. In 2021, freight revenue (435.9 billion yuan) surpassed passenger revenue (302.1 billion yuan), but the overall logistics mix remains imbalanced, limiting revenue diversification.
The Chinese government’s emphasis on economic growth has often overridden concerns about debt repayment. As Zhao Jian, a professor at Beijing Jiaotong University, noted, “The government’s priority is economic growth, and it doesn’t care about debt repayment.” This mindset has driven the approval of unprofitable routes, with 80-85% of HSR lines operating at a loss.
In March 2021, China’s State Council issued guidelines to curb HSR investments, halting projects in debt-ridden regions and on underutilized routes operating below 80% capacity. Within days, projects worth over 130 billion yuan in Shandong and Shaanxi were suspended. However, these measures have been inconsistently enforced, as economic stimulus priorities continue to drive new projects.
Reports of “irrational and even illegal ventures, bribery, and graft” have compounded financial woes. Dr. Lu, cited in recent analyses, highlighted these issues as contributing to inefficient investments and further debt accumulation. Such governance challenges undermine the HSR’s long-term viability.
The HSR debt, approaching $1 trillion, poses a systemic risk to China’s economy. With liabilities at 63.5% of assets in 2024, China Railway’s financial health is precarious. The debt surpasses that of the crisis-ridden Evergrande Group, signaling a potential “grey rhino” event—a highly probable, high-impact financial crisis. This could strain state-owned banks and impact global markets, given China’s economic weight.
The HSR’s high costs and fare hikes exacerbate economic inequity. Public funds and bank loans subsidize a system that primarily serves wealthier passengers, as noted in research by Xutao Yang. This dynamic has sparked public anger, particularly as inflation and economic slowdowns squeeze household budgets. The existence of stranded assets, like unopened stations, further erodes public trust in infrastructure spending.
China’s HSR debt crisis offers cautionary lessons for other nations, such as India, pursuing similar projects. With construction costs per kilometer significantly higher than China’s, and lower per capita income, countries must prioritize routes with high passenger demand and sustainable financing models to avoid similar pitfalls.
In 2024, China Railway reported a net profit of 3.8 billion yuan, a 17% increase from the previous year, driven by a 3% revenue rise to 1.28 trillion yuan. Freight services, particularly to Europe, have grown, with a 22% increase in freight trains in 2021 compared to 2020. However, these profits are insufficient to offset the massive debt, covering only operational expenses rather than principal repayments.
The 2024 fare hike aimed to improve operational revenue but risks further reducing ridership. Attempts to attract private investment through listing subsidiaries have had limited success, as the scale of China Railway’s debt deters significant private sector involvement.
The State Council’s 2021 guidelines and subsequent project suspensions signal a shift toward fiscal caution. However, the continued push for expansion to meet 2025 and 2035 targets suggests that these measures may not be sufficient to address the debt crisis comprehensively.
China’s high-speed rail network, while a symbol of technological and economic ambition, is mired in a debt crisis driven by overinvestment, unsustainable financing, low ridership, and governance challenges. The prioritization of economic growth over financial prudence has led to a debt of nearly $900 billion, with projections nearing $1 trillion.
While recent profits and policy adjustments offer some relief, they are insufficient to resolve the structural issues. The crisis underscores the need for balanced infrastructure planning, prioritizing high-demand routes, and addressing social equity concerns. As China navigates its next five-year plan (2026-2030), policymakers must weigh the benefits of further expansion against the risks of a deepening debt trap, with implications not only for China but for global economies observing this cautionary tale.