(Updates with China Premier’s comment in eighth paragraph.)
June 30 (Bloomberg) -- China’s newest high-speed railway is transforming the rural town where the philosopher Confucius was born more than 2,500 years ago.
Qufu built Confucius Avenue linking downtown to its train station, added a bus terminal nearby and won investment from Shangri-La Asia Ltd. for the city’s first luxury hotel before today’s opening of the 221 billion yuan ($34 billion) Beijing- Shanghai high-speed railway. The line, which passes through Qufu, will slash the 550-kilometer (340-mile) train journey from Beijing to two hours from about seven hours.
“Everyone is talking about the arrival of the bullet train,” said Zhang Mingzhe, a city government spokesman. “They all want to see how it will boost investments, job opportunities and property prices.”
New houses, offices and hotels have been built along the 1,318 kilometer-long Beijing-Shanghai line as high-speed trains make once isolated towns convenient destinations for weekend getaways or possible homes for commuters wanting to live outside big cities. The government is looking for similar effects nationwide as it spends 2 trillion yuan on high-speed railways to help spread growth beyond coastal regions.
“One of the reasons we built the line was to help boost economic development and business in provinces along the route,” said Zhao Guotang, deputy general manager of state- controlled Beijing-Shanghai High Speed Railway Co.
Qufu, home to 640,000 people, had per capita gross domestic product of 36,718 yuan last year, based on government data. That compares with about 89,000 yuan in Shanghai and 70,000 yuan in Beijing.
300 KPH Trains
A Beijing-to-Qufu trip costs 245 yuan in coach class on a 300 kilometer-per-hour train, the quickest service. There are also two premium classes. A ride from Beijing to Shanghai, which takes less than five hours, costs from 555 yuan.
“The high-speed railway has great importance in improving transportation, and boosting social and economic development,” Premier Wen Jiabao said in a speech at Beijing’s South Station before boarding the debut service at 3 p.m.
The line, with 24 stops, will offer 90 services a day in each direction, including non-stop shuttles between Beijing and Shanghai, China’s two big cities. The railway will carry about 180,000 passengers a day initially, Rail Vice Minister Hu Yadong said on June 13.
Xuzhou, a city of 9.6 million people about halfway along the line, is developing a 5.2 square-kilometer business district around its train station. Plans include an office block and four-star hotel being built by closely held Shanghai Greenland Group Co.
“The train will bring a sea-change in Xuzhou’s economic landscape,” said Cai Qianfeng, who headed a high-speed rail project in the city, traditionally a centre for heavy industries. “We can develop more in logistics, business and financial services.”
The new line helped boost property prices in Xuzhou by 17 percent in the past 10 months, based on data from property- researcher SouFun Holdings Ltd. Other stops along the line, including Langfang, Zhenjiang and Wuxi, have also posted jumps of 10 percent of more. By comparison, Beijing has risen 6.6 percent and Shanghai has gained 2.7 percent.
High-speed trains will have the greatest impact on property prices in second and third-tier cities close to major economic regions, said James MacDonald, head of China research for Savills Property Services (Shanghai) Co. A bullet-train link eases travel and boost cities’ profiles by showing that planners consider them to be “significant,” he said.
Bengbu, in northern Anhui province, is developing a satellite town centered on its high-speed train station, which includes universities, parks, government buildings and a residential complex.
“Let the bullet train accelerate your big-home dream!,” Greenland Group writes on a website advertising a property development in the city, a two-hour ride from Shanghai.
Confucius Avenue and the new bus station in Qufu, Shandong province, cost 755 million yuan, the equivalent of 70 percent of the city’s 2010 revenue. The bus and rail station will be able to handle a combined 80 million passengers annually on both regional and intra-city services, Zhang said.
The city and seven others in Shandong formed a group to promote tourist visits using high-speed trains, with packages and services targeting weekend visitors. About 3.8 million tourists went to Qufu last year to see its walled town, the Confucius Mansions and the philosopher’s tomb with its retinue of stone panthers and griffins.
Shangri-La is scheduled to open a 491-room hotel in Qufu next year, according to its annual report. The city will be the smallest in China to have a property run by the luxury-hotel chain.
“Shangri-La decided to build the hotel here because of the train and the tourist boom it will bring,” said Qufu’s Zhang. The Hong Kong-based company declined to comment in an e-mailed reply to questions.
While bullet trains can bring visitors in, they also pose a threat to local businesses by making it easier for residents to visit other cities, which may offer a greater range of shops, said Savills’ MacDonald. The new links may also let businesses run regional operations from a central location, enabling them to close offices in other cities, he said.
Cities need to invest in infrastructure to support new bullet-train services to prevent companies from moving to other locations, said Douglas Webster, an urban economist at Arizona State University.
“It’s a very perishable effect,” said Webster, who advised on a development near the new line’s Shanghai terminus. “If you don’t have good connections with the station itself, the effect wears off very quickly.”
--Jasmine Wang and Bonnie Cao. With assistance from Tian Ying in Beijing. Editors: Neil Denslow, Frank Longid, Josh Fellman
To contact the reporter on this story: Jasmine Wang in Hong Kong at Jwang513@bloomberg.net; Bonnie Cao in Shanghai at firstname.lastname@example.org
To contact the editor responsible for this story: Neil Denslow at email@example.com