Will Large-Scale High Speed Railway Construction Push Chinese Railway Industry over the Edge of Self-Development Capability?

High speed railway (HSR) of more than 17000 kilometers will be put into operation by 2020 in China. With its astronomical investment and high ratio of debt to equity, large-scale construction is pushing Chinese railway industry over the edge of self-development capability. The emphasis on their amazing speed and technology complexity has been used to justify the investments as a stimulus to the domestic economy, while by and large, the financial sustainability has been neglected. The paper applies Commercial Feasibility Study (CFS) model to analyze the effect of HRS investment on financial sustainability, the result shows that financial crisis will break out by 2014, and refunding of RMB9.69 billion is needed to close cash flow loopholes. Chinese railway has to struggle for a hard time period of 23 years before cash flow returns to normal, and Chinese railway industry will suffer losses no later than 2023, and the net debt will account for 8% of GDP. HSR system is the main source for self-development capability degradation. The financial risk of Chinese railway lies in the fact that it is being constructed to a too high a standard especially with respect to the speed. The HSRs exceed the current social economic needs and will lead to the overall financial deterioration. Triple Analysis Framework manifests that railway industry self-development capability will greatly influence monetary system and fiscal system and can be the last straw to break the camel´s back that salvage measures should be taken to countervail possible negative impacts.