Bloomberg News

China High-Speed Rail Section Collapses After Rains, Renewing Safety Fears

March 12, 2012

A section of an unopened high-speed railway collapsed in central China’s Hubei province following heavy rains, renewing safety concerns prompted by a fatal crash last year.

Hundreds of workers have been sent to make repairs to the 300-meter (984-foot) roadbed after the March 9 failure in Qianjiang city, the official Xinhua News Agency said today, citing local authorities. The stretch, which had undergone test runs, is part of a line due to open in May.

China Railway Construction Corp. (1186), which built the section, according to Xinhua, and China Railway Group Ltd. (390) both plunged the most this year in Hong Kong on speculation the incident may deter the government from pushing ahead with a 2.8 trillion yuan ($443 billion) building plan. Construction was slowed last year after 40 people were killed in a high-speed crash in July.

“The collapse has hit the market’s confidence in the sector,” said Gary Wong, an analyst at Guotai Junan Securities Co. in Hong Kong. “The ministry assured people that major railway incidents wouldn’t happen again.”

The failed line is part of the 291-kilometer (181-mile) long Hanyi High-Speed Railway, linking the provincial capital Wuhan and Yichang city, according to Xinhua. The owner of the line, Hu Han Rong Railway Hubei Co. denied the incident, according to cnhubei.com, a state-backed local news portal.

Soil Report

Earlier this month, Time Weekly, a Guangdong-based weekly newspaper, said another section of grading on the same line had been built with earth instead of rocks. The builder of that section, China Gezhouba Group Co. (600068), and Hu Han Rong said no problems were found in inspections, according to the official People’s Daily. No phone number was listed for Hu Han Rong, a venture between the rail ministry and the local government, on its website or with directory assistance.

China Gezhouba on March 3 said the quality of its work on the Hanyi railway “is good.”

China last year fired rail officials after parts of a 2.3 billion-yuan construction project in northeastern Jilin province were illegally subcontracted to unqualified builders including a former cook, People’s Daily reported in November. The illegal builders used shoddy materials.

“These are systematic problems,” said Vivian Liu, a Shanghai-based analyst with Sinopac Securities Asia Ltd. “The regulatory inspections are nowhere near enough.”

Shares Slide

The railway ministry didn’t reply to questions sent by fax. The government information office in Wuhan, Hubei referred media inquiries to websites. No information was posted there.

Calls to Beijing-based China Railway Construction went unanswered. The section was built by China Railway 12th Bureau Group Co., according to Xinhua. That’s a unit of China Railway Construction, according to the company’s interim report.

The railway builder fell 7.3 percent to close at HK$5.31 as of 4 p.m. in Hong Kong, the most since Oct. 31. China Railway Group dropped 5.4 percent to close at HK$2.83, the most since Dec. 28. Trainmaker CSR Corp. fell 4.1 percent to HK$5.42.

China is already scaling back rail-expansion plans. The ministry plans to cut construction spending to 400 billion yuan this year, state-run China Daily said Dec. 24, citing Railway Minister Sheng Guangzu. That compares with 461 billion yuan in 2011 and 707 billion yuan in 2010, according to ministry figures.

The rail system is due to reach 120,000 kilometers by 2015, under the nation’s latest five-year plan. That includes boosting the high-speed network, which opened in 2007, to 16,000 kilometers.

In the July crash, near Wenzhou, a train was partly pushed off a viaduct by another locomotive after a lightning strike caused signaling equipment to malfunction. Three officials in the local rail bureau were fired within days of the incident. After a longer investigation, more than 50 others were punished and the government pledged to fix design flaws.

To contact Bloomberg News staff for this story: Liza Lin in Shanghai at llin15@bloomberg.net; Jasmine Wang in Hong Kong at jwang513@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net


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