High Speed Rail Won't Make or Break Hong Kong

Stephen Chung

Managing Director

Zeppelin Real Estate Analysis Limited

February 2010

Credit to Bombardier

Your humble author supports the building of the high speed rail which connects Hong Kong to not only Guangzhou but also many other cities on the Mainland. Yet, he has no compelling reasons to offer other than to say he likes real estate, architecture, and construction in general. Furthermore, it is way beyond the capabilities of a real estate analyst to comprehensively dissect a super big infrastructural project of this scale. Yup, he harbors a certain bias.

Nonetheless, some of the arguments put forward by both for and against parties sound intriguing, even peculiar, and here’s why:

A)      (For) Hong Kong will be marginalized without it = or something like that, as if implying Hong Kong will be marooned and left there dying. No doubt the high speed rail would complement the overall existing transportation network and offer one more choice for travelers, yet to say its absence (alone) will lead to a doomed demise may be overstated. First, Hong Kong is well connected via land, sea, and air. Second, if there are ‘treasures’ to be hunted in Hong Kong, one needs not worry about hunters not coming. If not, even if one throws in free rail passes and hotel rooms, there will be few takers. IF Hong Kong is to die a marooned death, it will unlikely be due to solely an absence of high speed railways.

B)      (For) Hong Kong GDP will suffer = using the HK$66,900,000,000 estimate provided by the government, and assuming a multiplying factor of say 4 to 5 (economists are welcomed to help out here), the rough total ‘economic effect’ will probably fall between HK$268B to HK$335B. Not a small sum and given the HK GDP per annum being in the HK$1700B range, these figures would occupy around 16% to 20% of GDP. Not an insignificant portion either. However, as such projects tend to be built over several years and thus probably the overall effect would be noticeable but not earth-shaking. Furthermore, throwing HK$67B at something else may also generate similar economic effects.

C)     (Against) There will be few users and tickets will be too expensive = this could happen yet sometimes demand can be generated because ‘it’ simply exists! Your humble author recalls when the existing mass transit was being contemplated in the 1970s, there were voices of doubt and opposition. Now we can’t do without it. I have also read when Parisians decided to build the Eiffel Tower, there was strong opposition too. Now the 19^th Century eyesore has become a modern icon. It is not unusual for people at the time to consider untried and big scale projects to be redundant perhaps due to being them (the projects) being a bit ahead of their time [or the people being behind the times?!].

D)     (Against) The high speed rail offers no economic benefits = the internet has enabled ‘flocks’ of a feather to fly together and instead of reducing face-to-face meetings, the internet has actually helped increased human contact. Given further urbanization is to take place in many Mainland cities, and that this will require talent and will incubate talent at the same time, there are more than sufficient opportunities for the talented in Hong Kong to mingle with their counterparts in various cities on the Mainland, be these for business cooperation, sharing of professional knowledge, or industry networking. The high speed rail would enable such mingling. Naturally, a high speed rail is only a piece of hardware, and it takes participants from all sides to make it worth its while.

E)      (Against) The high speed rail will only benefit certain segments of society or the business community = no doubt it will, e.g. construction workers, engineers, real estate people etc may see more employment, contract, and investment opportunities, yet it is hard to find any project, or anything for that matter, which would benefit everybody in the same way (even drinking water, which we all need, could be harmful to a patient with renal problems). Also, very often some sectors may even suffer, e.g. the invention and popularization of the automobile rendered horse carriages obsolete, and the mechanical engineers prospered while the horse carriage industry went out of business.

Non-financial-economic reasons aside, if one is against building the high speed rail purely due to financial-economic reasons, then let the pro-folks go ahead with it (the Legislative Council had passed the proposal at the time of this article). If not, then every time there is an economic downturn, the pro-folks would be lamenting how things would be better if we had a high speed rail. Having it built is the only way to see whose expectations would prove to be visionary.

Will it (the high speed rail) be pretty? Will it be rich? Que sera sera*.

*For the uninitiated or really too young to know, it is one of the popular songs sung by the famed Doris Day. It means what will be, will be.

Notes: The article and/or content contained herein are for general reference only and are not meant to substitute proper professional advice and/or due diligence. The author(s) and Zeppelin, including its staff, associates, consultants, executives and the like do not accept any responsibility or liability for losses, damages, claims and the like arising out of the use or reference to the content contained herein.    

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