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  • Ernie Diaz

Loss Leader

The kindest adjective used to describe China State Railway Group, after news they will JV with ecommerce JD.com, is "money-losing". Not "2/3rds-of-the-world's-high-speed-rail-building". Not "innumerable-job-creating". Not "local-economy-boosting". "Money-losing". 

To be sure, covering and connecting China with high-speed track & train has proven fraught with problems: inefficiency chief among them. 

But what's modern socialism without a public project screaming "overweening ambition"? The official and public Chinese view is that crucial infrastructure and services are a public good. Besides, privatizing prisons and healthcare has so far proven less than an unalloyed success, where practiced.

"This JV with JinDong will certainly not bring China Railway Group into the pink," says Jimmie Jeremejev. "A project as grand in scope as China's vision for a high-speed-train-connected country will likely never be 'profitable' in a balance sheet sense. In terms of creating public wealth, though, the upside is incalculable. Expect more private partnerships to defray expenses, and a slow-down in expansion as national debt concerns mount. Otherwise, if you'll pardon the pun, China's high speed train dominance remains on track."

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