By Alison Leung and Fang Yan
HONG KONG/BEIJING (Reuters) - A deadly train crash in China over the weekend has raised concerns about the safety of the country's fast-growing rail network and threatens to undermine its plans to export high-speed train technology.
The concerns were enough to push share prices down in Chinese rail companies by as much as 16 percent.
"I think since 2008 China has experienced what we call a 'great leap forward' of railway construction," said Ren Xianfang, a senior analyst at IHS Global in Beijing . "We've long had suspicions that this speed of construction is unsustainable."
The main problem, Ren said, are that the systems in place imply "there are lots of systemic fault lines with China's management of the high-speed train network" that has resulted in under-investment in the software infrastructure.
"So even though we have very rapid build-out of physical infrastructure, the software management has not kept up," Ren said. "This accident overall has changed the perception of everything related with China's high-speed railway, high-speed track and high-speed trains," Ren said.
China sacked three senior railway officials a day after Saturday's collision between two high-speed trains that killed at least 36 people in the country's worst rail disaster since 2008.
A spokesman for China South Locomotive, which built both trains in a joint venture with Canada's Bombardier, said signalling operations were to blame for the crash.
"The quality of the trains is fine. Neither had any accidents previously. It's the signaling system that went wrong," he said.
China has been working for years to develop a high-speed rail network to rival Japan 's famed bullet trains and use the technology it has acquired or developed to sell its own trains abroad in an effort to move up the value chain from producing mass market goods to being a hi-tech exporter.
Under Beijing 's five-year plan to 2015, the country will invest between 3.6 trillion and 4 trillion yuan ($540-607 billion) in its rail sector.
Japanese bullet trains, operated by JR Tokai, JR East, JR West and unlisted Kyushu Railway, have not had any accidents involving injuries or deaths since they started running in 1964, said Hideaki Tanaka, an official at the railway bureau of the transport ministry.
Japanese operators have installed the Automatic Train Control (ATC) system on bullet trains, which automatically brakes if trains are approaching too close to one another, said a JR East spokesman, who declined to be named due to company policy.
China has one of the highest-density rail systems in the world, according to Michael Komesaroff of Urandaline Investments in Australia.
"The Chinese are running at least two times the level of anyone else in the world. That means signaling and systems management become more critical," Komesaroff said.
The crash is a further blow to China's high-speed railway ambitions after the country's railway minister was sacked earlier this year and became the subject of a disciplinary investigation over corruption.
"The markets were concerned about possible slowdown of high-speed railway construction when the railway minister was sacked," said Du Jun, an analyst with Shanghai Securities.
"The accident might have some impact on export of the high-speed rail as overseas clients would obviously have doubts on quality and safety issues. However, it's a bit too early to draw any conclusions before they find out what exactly went wrong."
SHARES TAKE A HIT
Shares of China South Locomotive fell as much as 16 percent to its 12 month low of HK$5.85 and were trading down 13.96 percent at 0823 GMT. Shares of China Northern Locomotive, which dominates China's train equipment market with CSR, fell 9.6 percent in Shanghai.
Shares of Zhuzhou CSR Times Electric, a train-borne electrical systems and electrical components maker, were down 14 percent. China Automation Group, a safety and critical control systems provider, fell 19 percent while China Railway Group, an infrastructure construction firm, lost 6.7 percent.
Shares of Chinese airlines gained sharply as investors hope more travellers would take to the sky after the train crash.
Air China rose more than 3.5 percent while China Southern Airlines and China Eastern Airlines gained 3.4 percent and 4.7 percent, respectively.
(Reporting by Alison Leung and Anne Marie Roantree in Hong Kong and Fang Yan in Beijing ; Additional reporting by Yoko Kubota in Tokyo; Writing by Charlie Zhu and Matt Driskill, Editing by Jonathan Thatcher)