Friday, April 01, 2011

Auditors: Widespread Corruption, Kickbacks, Embezzlement Plague China's High Speed Rail Projects

Construction Worker on Beijing-Tainjin High Speed Line- China Daily Photo
China's National Audit Office released a report earlier this month detailing how 187 million Yuan (roughly $28.5 million) in funds were embezzled from the Beijing-Shanghai high speed rail project alone.
China’s state audit office said on Wednesday it had identified numerous cases of embezzlement and other irregularities from just a three-month period of construction on the Beijing-Shanghai high-speed line last year and has passed the cases on to judicial authorities for formal investigation.

China’s railway minister and the rail ministry’s deputy chief engineer were both removed from their positions last month for “severe disciplinary violations” — an allegation that usually results in criminal charges for corruption.
The resignations and scandals have prompted China's Ministry of Railways to re-inspect some of the lines while casting future projects in doubt. Other problems uncovered by the audit include double-billing and filing of fake invoices.

Sacked former Railways Minister Liu Zhujin allegedly pocketed $122 million in payouts for doling out contracts for construction of various high speed rail projects since taking office in 2003. The Ministry racked up an estimated 1.3 trillion Yuan in debt under Liu's tenure and Liu is the highest ranking Communist Party official to be dismissed from his post in 5 years.
China Rail Attendants Completing Training in Tianjin- Xinhua Photo
China's ambitious high-speed rail projects have frequently been cited by politicians here as an example of large public works projects playing a role in improving a nation's economy, with California and Chicago seeking Chinese capital and technology for their own proposed high speed rail projects.

However, ongoing corruption case against Liu Zhijun should stand as a cautionary tale for some of high-speed rail's more enthusiastic backers.

Should the ambitions of President Obama and so many other politicians regarding high speed rail be realized, we would likely be faced with the prospect of multiple public works projects even bigger in size and scope than the Big Dig, only with more cost overruns and even less oversight. And even if the various projects finish on budget and on time the costs simply won't end with the construction of a dedicated high-speed rail line. There is also the matter of ridership and maintaining not only the rail and roadbed, but the electrical infrastructure such as transformers and overhead wires and catenary poles.

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