There have been quite a few press reports - first by China Daily and then by the Chinese-language press - about the plan to build a 220-billion yuan ($28.9 billion) high-speed Beijing-Shanghai railway.
Shortening the travel time to about five hours from eight could be more significant than it sounds, especially after one sizes up the line at the check-in counter for Beijing-Shanghai express flights at the airport. The fully loaded Boeing-777s that shuttle between the two cities make it clear that every possible connection between Beijing and Shanghai is too important to overlook.
There is no question that the coming competition between rail and air services will yield convenience for travelers and business customers.
But ease of transportation is only part of why this development is significant. In the near future, large public projects will be perhaps the most effective way to direct the oversupply of liquidity - meaning investors' money - away from the already overvalued and continuously bubbling domestic A-share market and toward more useful purposes.
In terms of expected returns, it will be difficult for the vehicles available to Chinese people looking to invest overseas to compete with domestic public projects.
The new offshore services are either too young or too small, and it will take time for them to build up reputations for delivering promised returns. Even if they rely on global partners, the returns they can expect to bring home from fluctuating faraway markets are likely to be compromised by the renminbi's rising exchange rate.
If investors choose to keep their money home, one sensible move would be to look for private equity projects, or projects in which they can make a direct investment rather than having to go through the stock markets. Whether they choose to invest in a street-side restaurant or a Web service, they can decide for themselves how and with whom to pool their money.
Actually, the Chinese have long been doing this. Before the boom cycle in the A-share market started about two years ago, most investors were chasing projects ranging from urban property development to small coal mines and power plants.
The trouble was that those poorly regulated, often discrete, investment projects often conflicted with the development plans of the central government. They may have generated some financial rewards for their investors, but more often than not they also created problems.
On the political front, under-the-table deals with local officials were rampant, which only gave rise to questions about the legality of such projects. And to the public resentment of the rich.
Environmentally, small coal mines and unapproved power plants were a major cause of the bad air surrounding many of our cities.
In sheer business terms, the blind pursuit of instant returns created an environment in which it was easier to equip these projects with old technologies. Many of them ended up being shut down to make way for larger, more advanced industrial operations.
The government will have to learn how to guide the nation's investment market - to channel investors' money into worthy projects and avoid the waste that has been seen before. Well-planned State-sponsored public projects are good tools for making this possible. There are just too few of them around.
Judging from the dangerous size of the bubble in the A-share market, it should not be too difficult to raise enough money to build 10 high-speed railways at one time.
E-mail: younuo@chinadaily.com.cn
(China Daily 11/05/2007 page4)
