March 08, 2010

Beijing's Ambitious Plans to Settle the West by Rail

Wang Mengshu, a Chinese expert in railway engineering and tunneling, has made a splash telling newpapers from the South China Morning Post to the Telegraph of Beijing's plans to extend high-speed railways into Central Asia and connect China to southeast Asia and eventually Europe.

The heads of China Eastern (NYSE:CEA) and China Southern (NYSE:ZNH) airlines warn that the Chinese high-speed rail network threatens their market for short and medium hauls. Some analysts believe that once complete Chinese railways will make flights under 800 kilometers (under 500 miles) uncompetitive potentially eliminating a great deal of flights. Investors in Chinese airlines should take this possibility seriously.

"We foresee that in the coming decades, hundreds of millions of people will migrate to the western regions" Wang said when discussing a plan to build high-speed rail from Urumqi, capital of Xinjiang autonomous region, to the Caspian Sea and beyond. It is interesting to speculate on just how transformative a potential migration of that many people -- most likely poor rural Chinese -- will be on western China, Central Asia, even Eastern Europe.


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