When Zhang Xi, the operator for the G801 high-speed train, made a hand gesture to signal the vehicle's departure from Beijing at precisely 9 a.m., the Beijing-Guangzhou high-speed railway had formally begun its long-awaited inaugural journey.

On December 26, history was made when the world's longest high-speed rail opened to the public. The line runs from the national capital Beijing down to the southern metropolis of Guangzhou, capital of Guangdong Province, covering a total of 2,298 km.

The high-speed trains run at a maximum speed of 300 km/h, although they can reach up to 350 km/h, cutting the distance between two of China's largest cities to eight hours, down from the usual travel time of 20 hours.

The Beijing-Guangzhou line runs through several provincial capitals in China's less developed interior as the Central Government tries to shift development away from the country's more prosperous coastal areas to more underdeveloped western and central regions.

At a time when other nations are simply content to bury any plans for high-speed rail in feasibility reports or too timid to cough up the funds to lay down a single track, China continues to illustrate to the world how serious it is about developing an expansive network of high-speed lines.

Despite setbacks in the development of high speed over the past 18 months, China has shown a renewed sense of vigor as it expands its transportation network, which it sees as vital in job creation and economic growth. Nonetheless, problems and concerns remain, which could impede the country's plans to realize the full potential of its high-speed network.

Economic benefits

The Beijing-Guangzhou line is the latest in the Chinese Government's plans to establish a network of four north-south lines and another four east-west routes as part of its Medium and Long-Term Railway Network Plan. The total length of high-speed railways in the country has exceeded 9,300 km.

The Beijing-Guangzhou run is the most significant one to open since the Beijing-Shanghai route opened in 2011 and hopes are high that the new line will spur development of China's poorer inland provinces.

"In China's high-speed rail network, the Beijing-Guangzhou railway is an important north-south line," said Chen Yabing, chief engineer of the Beijing-Zhengzhou High-Speed Rail Project.

Prior to the completion of the Beijing-Guangzhou high-speed railway, the line ran from Zhengzhou, capital of Henan Province, down to Guangzhou. The addition of the Beijing-Zhengzhou portion was the final link in the historic line.

"Starting from Beijing, it spans across several major economic zones in north, central and south-central China and the Pearl River Delta. By linking major densely populated cities like Beijing, Wuhan, capital of Hubei Province, and Guangzhou, it will give a great push to the economic development of regions along the line," said Chen.

Spanning five provincial capitals, the national capital and five provinces—Hebei, Henan, Hubei, Hunan and Guangdong, the Beijing-Guangzhou line is widely considered to be the backbone of China's high-speed rail network. The distance between the main cities along the route has been substantially shortened and hopes are high for stronger regional integration as a result.

The Beijing-Zhengzhou section is also of great significance to the development of the recently established Central Plains Economic Zone, which encompasses Henan, and parts of Shandong, Anhui, Hebei and Shanxi provinces. Zhengzhou is expected to play a key role in the economic zone as a major transport hub.

Taking into account a future track from Zhengzhou to Xuzhou in Jiangsu Province, and the already available line from Zhengzhou to Xi'an, capital of Shaanxi Province, "The high-speed rail framework of the Central Plains Economic Zone has taken shape," said Zhou Li, Director of the Science and Technology Department at the Ministry of Railways, on a test run of the Beijing-Zhengzhou portion on December 21.

Transportation and logistics will make a big stride forward with the Beijing-Guangzhou line.

Currently, 80 percent of fast-freight goods are transported by highway and 15 percent by air, while railways account for less than 5 percent.

According to a preliminary estimation, an additional 24 pairs of freight trains will be in service on the line per day, and the freight capacity between Beijing and Wuhan will be increased by around 20 million tons per year.

Because transport by railway is more economical and accessible, some say the cost of using high-speed to move goods is 50 percent lower than by air. Rail lines are also less vulnerable to unfavorable weather conditions.

Tourism is also likely to receive a boost from the Beijing-Guangzhou line. Recently, representatives from seven provinces and 31 cities came together to promote tourism in the regions along the line running from Beijing to Hong Kong and Macao (an extension of the Beijing-Guangzhou high-speed railway), with the aim of consolidating travel routes and building up a leisure tourism belt.

But the Beijing-Guangzhou line has triggered panic in the airline industry. After releasing discounts for short-haul flights, some airline companies are even mulling over the elimination of air routes hard hit by established high-speed lines. According to a report by Guangzhou-based Nanfang Daily, some airlines have lowered the cost of a one-way ticket from Wuhan to Beijing to under 200 yuan ($32), a dramatic discount compared with the original price of more than 1,000 yuan ($160).

Given how time-consuming it can be to travel through airports—checking in, security checks and possible flight delays—the airline industry may suffer if more passengers turn to high-speed rail, especially for shorter routes. The challenge faced by airlines, however, may also provide an opportunity for the industry to better integrate airline networks and improve its efficiency and services.

Tackling special conditions

To cope with unique geographical conditions along the Beijing-Guangzhou route, various solutions have been found for concerns like subgrade construction on soft soil.

Furthermore, bridges made to especially handle the high-speed rail line have been developed over the Yangtze River and the Yellow River. The Wuhan Tianxingzhou Bridge over the Yangtze River has the world's largest span of 504 meters. The underground tunnel in Shijiazhuang, capital of Hebei Province, with a total length of 4.98 km and six tracks, is the most complicated design among railway tunnels in China.

Significant gains have also been made on construction of high-speed rails. The tracks along the newly opened Harbin-Dalian high-speed railway were built to cope with the frigid temperatures of China's more remote northeast.The Harbin-Dalian line is the only high-speed railway in the world designed for a high-latitude region, where temperatures in winter can drop to minus 40 degrees Celsius. Snow melting and anti-freeze properties are built into the roadbed and power substations.

Controversies remain

Guangdong, dubbed China's manufacturing powerhouse, is a source of China's Spring Festival rush, also known as the greatest migration of people in the world. According to statistics from the Department of Human Resources and Social Security of Guangdong Province, Guangdong was home to 26 million migrant workers in the past two years. During the 40-day Spring Festival in 2012, Guangzhou saw over 28 million departures.

Many believe that the new Beijing-Guangzhou line will lure passengers away from other conventional, slower lines along the route, which are already overflowing with passengers during the festival period.

"For the coming Spring Festival rush in January, the trains should be less crowded than usual," said Zhao, adding that dozens of trains a day—each with a seating capacity of 1,000—are expected to travel between Guangzhou and Beijing everyday.

Ticket prices, however, have been criticized for being too high. The ticket price for the Beijing-Guangzhou high-speed railway ranges from 865 yuan ($139) for a seat in second-class to 2,727 yuan ($437) for one in business class.

Some netizens have called for the Ministry of Railways to publish the operating cost for the Beijing-Guangzhou line to explain the ticket prices.

"Reasonable prices can be worked by taking passenger flow and future income levels into account," says Xu Fengxian, a research fellow with the Institute of Economics at the Chinese Academy of Social Sciences. " Right now, common people cannot afford such prices."

Tian Fengshao, a research fellow at the Institute of Sociology at Henan University, argued that though ticket prices may be reduced during the upcoming Spring Festival, travel by high-speed rail should gradually morph into a common means of passenger travel rather than an indicator of social status.

Doubts about safety also run high among the public given the tragedy in July 2011 near Wenzhou, Zhejiang Province, when a bullet train rammed into another train stranded on the track, killing 40 people.

Design flaws, poor management and a mishandling of equipment struck by lightning were found to the culprits behind the train crash, according to an investigation by the authorities.

Despite a design speed of 350 km/h, Zhao says the operational speed along the Beijing-Guangzhou line will run at 300 km/h to ease any fears of trains running faster than need be.

"Safety is our top priority," he said.

At 5 p.m. on December 26, the first high-speed train arrived in flower-dotted, subtropical Guangzhou on time. The successful launch of the Beijing-Guangzhou high-speed railway will help the country regain its confidence in the development of its high-speed network. Nonetheless, China's high-speed railway development has plenty of work to do to guarantee safety and win the hearts and minds of the Chinese people.

Three new express trains have opened in China, making travel from Beijing to Guangzhou, Xi'an and Luoyang a lot easier.

Both the Xi’an and Luoyang routes take just four hours, cutting travel time by about six hours.

Travellers are then only a short car drive away from some of China’s most famous sites, such as the imperial Terracotta Warriors and the Buddhist carvings at the Longman Grottoes.

However, according to The China Guide the most exciting of the three new openings is the new Beijing-Guangzhou line, which allows travellers to reach the southern metropolis in just eight hours.

The world’s longest high-speed rail route, the bullet train averages speeds of up to 186 mph, cutting travel time by over four hours.

From Guangzhou’s East Train Station, it's a brief two-hour train ride into Hong Kong – a journey that used to take an entire day from Beijing.

A spokesperson for The China Guide said: “Often, express trains in China are cheaper than air travel and far more reliable.

“Now travel to these cities by train takes about the same amount of time as flying without all the hassle of checking-in and going through security.”

BEIJING — China will sharply increase planned railway investment in 2013 to more than $100 billion, state media cited the railways minister as saying on Thursday, as part of plans to boost the economy.

The Ministry of Railways will spend 650 billion yuan ($104 billion) this year, the Xinhua news agency said, citing minister Sheng Guangzu as saying at an annual national work conference.

That marks a 30-percent increase from the planned investment of 500 billion yuan for 2012.

Actual rail investment in China usually turns out higher than the planned budget as Beijing has a tradition of increasing spending on infrastructure to bolster economic growth.

Economists, however, say they expect big ticket public works to become less of a factor in coming years as Beijing seeks to rebalance the economy toward more consumer-driven growth.

In the first 11 months of last year, actual investment in the rail sector hit 507 billion yuan, according to official data, already exceeding the 2012 target.

A rail investment boom started in 2003 when ex-railway minister Liu Zhijun, who was sacked in 2011 and is awaiting trial over alleged corruption charges, took office.

The government scaled back its investment plan last year after Liu's ouster, a train collision in July 2011 that killed at least 40 people and difficulties in raising funds.

The collision was China's worst rail accident since 2008 and sparked a torrent of public criticism that authorities compromised safety in their rush to expand the network.

The ministry held 2.66 trillion yuan in debts by the third quarter last year, or 61.8 percent of its total assets, previous Chinese media reports said.

But investment rose month by month in the second half of 2012, with more than 100 billion yuan added to the budget, the reports said,

China's growth hit a more than three year low of 7.4 percent in the three months to the end of September partly due to weak foreign demand for Chinese goods, marking a seventh-consecutive quarter of slowing.

By the end of 2012, China had 98,000 kilometres (60,760 miles) of railways in operation, the second-longest network in the globe, and 9,356 kilometres of high-speed lines, the world's longest, Sheng said, according to Xinhua.

A total of 5,200 kilometres of new lines will be put into operation this year, he said.

What follows is an excerpt from Canaccord Wealth Management’s Morning Coffee report.

A Caixin report citing a China Ministry of Railways (MOR) official indicates that China plans a 5,400-kilometre expansion of the country’s rail network in 2013.

To put it in context, according to Phat Dragon, if completed that would represent the third largest incremental increase in China’s rail network on record behind the stimulus years of 2009 and 2010.

Phat Dragon said, “with the consolidation of transport investment a crucial cog in the infrastructure led rebound to date, and outlays on utilities capex coming in way below expectations in late 2012, it is heartening that the MOR is firmly signaling “all aboard.’’

Shouldn’t this be bullish for iron ore?

Last week, the iron ore spot price traded up to $148.6 per tonne, that’s down slightly from the multi-year high of $158.9 [reached] on January 9.

Folha de Sao Paulo (via mining.com) reported that Vale SA’s (NYSE: VALE, Stock Forum) executive director for iron ore and strategy, Jose Carlos Martins, expects the “high volatility” in prices seen in 2012 will continue this year.

Martins expects iron ore to bounce between $110-180 per tonne, with a bias to the lower end of the range.

Meanwhile, Deutsche Bank AG (NYSE: DB, Stock Forum) says iron ore prices should rally to $170 per tonne in the first half of 2013 before falling to less than $120.

Argentina bought 409 rail cars that will make up 55 train formations from the State-owed China South Locomotive and Rolling Stock Corp Ltd, one of the country's two leading train makers, according to an e-mailed statement from the Embassy of Argentina sent on Monday.

The trains will be used to replace equipment running on two suburban lines in the South American country's capital of Buenos Aires.

The value of the purchase was $514 million, with a 30 percent down payment, another 60 percent during the supply of the rail cars and the final 10 percent installment on delivery of the last unit. The purchase will not receive financing.

Details for the second part of Britain's HS2 high-speed rail network have been unveiled.

Trains travelling at speeds of up to 250 mph will connect London with Manchester and Leeds by the year 2032.

So the Newsround team have been taking a look at five of the fastest trains on the planet...

1. CRH380A train, China
The snappily named CRH380A train (CRH stands for China Railway High-speed!) holds the Guinness World Record for the world's fastest passenger train.

It hit a top speed of 302.05 mph in December 2010, on a stretch of track between Zaozhuang city in Shandong Province and Bengbu city in eastern Anhui Province.

2. 'Floating' maglev MLX01 train, Japan
 
'Floating' maglev (short for magnetically levitated) trains don't have wheels - they use magnetic power to lift them and propel them along the tracks.

A MLX01 maglev train in Japan reached a whopping 361 mph on a test track in December 2003. These trains aren't currently carrying passengers in Japan yet.

3. Shinkansen 'bullet' train, Japan
 
Japan is famous for its super speedy and stylish bullet trains, which were launched in 1964.

A Japanese bullet train holds the record of fastest average speed on a train journey - the 500 Series Nozomi reached an average speed of 162.7 mph on the 119-mile line between Hiroshima and Kokura on the island of Honshu.

4. TGV, France
 
French people have been enjoying 200 mph rail travel since 1981 with TGV, which stands for Train à Grande Vitesse ("high speed train" in English).

A type of TGV called V150 holds the record for the highest speed on any national rail system - it hit a whopping 357.2 mph in April 2007.

5. Mallard steam train, UK
 
One for fans of more traditional train travel - this is Mallard, the world's fastest steam train!

The A4 class locomotive achieved a speed of 126 mph, hauling seven coaches weighing 243 tonnes down Stoke Bank, near Essendine, between Grantham and Peterborough on 3 July 1938.

Mallard is now on display at the National Railway Museum in York, but three other A4s are in operation in the UK.

Anil Ambani-led Reliance Infrastructure (R-Infra) has joined the race to build the $4 billion Churchgate-Virar elevated corridor connecting Churchgate (near Oval maidan) in south Mumbai to Virar, the largest infrastructure project in the offering under the public-private-partnership (PPP) model.

"We have attended the pre-bid meeting and will submit our bids by first week of March, before which the railways are likely to sort out issues like the state support agreement and land acquisition," said a source from R-Infra. The request for quotes (RFQ) submission is due on March 8, 2013.

R-Infra, which reported 78% increase in its December quarter net profits to Rs 728 crore, will have to compete with infra majors like L&T, IL&FS & GMR, Gammon and CAF of Spain, who have also expressed desire to bid for the project.

The project will be offered under the design, build, finance, operate & transfer (DBFOT) model and will provide air-conditioned metro like experience to commuters.

The 63km route will have a 43km elevated section and 8km underground section with 26 stations in-between. SYSTRA & RITES are the technical consultants for the project. The winning bidder is expected to complete the project in five years after the award.

The railways ministry expects 1.7 million commuters to take this corridor in 2019-20. R-Infra is also implementing its first Metro project in Mumbai, which will be operational later this year.

"R-Infra with its experience in Metro will be serious participants. We are developing the Versova-Andheri-Ghatkopar line and are well-versed with the project issues in Mumbai and in particular to the project alignment," said the source.

It may be recalled that Anil Ambani led firm bid a-third of Mukesh Ambani's RIL to built the trans-harbour sea link project, connecting Mumbai with the satellite city of Navi Mumbai to bag the $2 billion project and later to abandon it. Following this, R-Infra bagged both metro projects in Mumbai and the Worli-Haji Ali sea link. While the first metro line is expected to be operation by end of this year, the fate of second line and Worli-Haji Ali sea link is struck due to a host of issues between R-Infra and the state government authorities.

The bid for this ambitious project is expected to be aggressive as the bidders will be allowed to develop real estate for commercial purpose at certain locations.

Reliance Group has already tied up with Wanda Group of China for real estate development of its land bank in Mumbai and Bangalore and may rope in Wanda group of commercial development of real estate for this project as well. Shares of R-Infra closed down 2% at Rs 528 in a weak Mumbai market on Monday.

The British government on Monday unveiled details of new high-speed rail lines linking London to cities in northern England with trains travelling up to 360 kilometres an hour.

The government says the project, known as High Speed 2, will be the first new railway built north of London for more than a century, and will be an economic and environmental boon. But opponents claim the plan is too expensive and will ruin tracts of picturesque countryside.

The first 225-kilometre stretch of the line, announced last year, will link London to Birmingham, England’s second-largest city. The Y-shaped section announced Monday will extend to the northern cities of Manchester and Leeds.

Construction of the first section of the line is due to start in 2017 and be completed by 2026. The second phase is to be done by 2032.

Officials say the 32.7 billion-pound ($51 billion) project will create at least 100,000 jobs and cut journey times almost in half, covering the 320 kilometers between London and Manchester in an hour and eight minutes.

Treasury chief George Osborne said the railway would be “the engine for growth in the north and the Midlands of this country” — and worth it, despite the opposition.

“If our predecessors hadn’t decided to build the railways in the Victorian times or the motorways in the middle part of the 20th century, then we wouldn’t have those things today,” Osborne told the BBC.

“So you’ve got to commit to these projects, even though they take many years and, yes, they are expensive, but they are also an investment in the economy that will then create the money to enable us to afford our NHS (health service) and our education system and so on,” he said.

High Speed 1, which linked London to the tunnel under the English Channel, was completed in 2007.

MORE trains and buses are being scheduled and more ticket windows are opening as passenger volumes bulge for the Spring Festival travel rush, which started last Saturday and peaks next weekend.

Police also have busted some illegal ticket scalpers.

Shanghai Railway Bureau, the Yangtze River Delta regional railway operator, said more than 100 extra train trips will be added at peak times to popular destinations such as central China's Sichuan and Henan provinces.

Shanghai's two major long bus distance stations, which have sold more than 260,000 tickets, have added some 3,000 trips for peak times.

The time around the February 10 holiday is the most important time of the year for Chinese to return to their hometowns. The travel rush lasts 40 days.

Although bus and rail operators are selling tickets online for this year's rush, many travelers still line up at ticket booths. Five more booths have been added to 28 open at the Shanghai Long-Distance Bus Station.

Shanghai railway police said they have busted a rail ticket scalping gang, detaining two suspects that booked tickets via cell phone, and 234 tickets for which they were adding a fee of about 100 yuan (US$16.07) per ticket. Since passengers have to use their real name, they also had about 99 identity cards. Tickets sold without the traveler's real name are not valid.

After almost a century, battery-operated trains are back in Mumbai. The Mumbai metro, which is preparing final runs between Andheri and Ghatkopar, has procured a few battery-operated shunting vehicles that are used in the Versova yard for movement of trains and coaches.

"In the absence of diesel and electricity, these shunting engines are very handy for pushing and pulling empty wagons and test trains. Ten trains of four coaches each manufactured by CSR Nanjing in China have already arrived at Versova and are undergoing various trials. A battery-operated vehicle is used on inspection lines and within depot at grade level only. They can't be used on main lines or gradients due to their limited power," a senior metro official said.

It was nearly a century ago that such battery trains ran on the Western Railway. Archives show that the Bombay Baroda and Central India Railway, now called as Western Railway, had two battery-powered shunters for use in yards at Bombay. There were only two of this class and they were imported from England in 1927. These were used in the period when the railways was moving from steam locomotives to electric power. It was a year later in 1928 that the Western Railway was electrified.

Sources said there were also a few battery-powered locomotives used on the Gwalior lines built by Bharat Heavy Electricals Limited in 1987.

This is another old railway relic that the Mumbai metro has revived after a century, the first being old railway turntables, a rare 19th century technology that metro put in service a year ago. Turntables are used to move trains to change tracks. Sources in Metro One said the old and trusted technology has been modernised for the city’s new metro rail lines for use once the trains start running regularly.

Brazil’s economy might not be growing as fast as it used to, but investors will be given the chance to buy into what remains a true growth industry in Latin America’s largest country – prisons.

The government of Brazil’s richest state, S?o Paulo, will on Tuesday kick off a roadshow in London in which it will be seeking private investors for three prison contracts worth a total of R$750m ($375m) as part of an overall infrastructure package worth R$40bn.

The contracts could draw the attention of financial investors as well as international prison operators, such as London-listed G4S, which runs six jails in the UK, or US-listed Corrections Corporation of America.

“We will tender the construction and maintenance of three prison complexes for males with a total of 10,500 places,” Guilherme Afif Domingos, the state’s vice-governor, told the Financial Times.

His delegation includes Brazil’s biggest construction contractors, such as Odebrecht and Camargo Correa.

S?o Paulo has the biggest economic output in Brazil – on its own, its economy is bigger than that of any country in Latin America outside Mexico – and it has the best infrastructure.

Although the national economy has slowed this year, consumer spending remains strong. The state’s agricultural industries, particularly sugar cane, are growing, and its roads and railways are struggling to keep up.

Public sectors including hospitals, education and prisons are also finding it hard to keep pace with demands from a growing middle class for better services.

Of these, prisons are among the biggest potential growth industries. The number of people incarcerated in Brazil, which has the world’s fourth-largest prison population behind the US, China and Russia, was nearly 550,000 as of June last year, up more than 50 per cent in five years, according to Ministry of Justice figures.

Overcapacity in the country’s prisons is running at 178 per cent, according to the ministry, implying a need for a boom in prison construction.

The state government, meanwhile, is seeking to rebuild S?o Paulo’s once extensive intercity rail network with R$18.5bn of contracts to be offered, including links to industrial centres such as Campinas, S?o José dos Campos and Sorocaba, where companies such as Britain’s JCB, the excavator producer, have factories.

“This train network will be built in a macro-metropolitan region of S?o Paulo representing 63 per cent of the state’s population and 25 per cent of the GDP of the country,” Mr Domingos said.

Other projects include two metro lines valued at a total of more than R$15bn; a R$3bn monorail, the world’s first mass transit system of its type; hospitals; and a R$1.5bn contract to “digitise” classrooms in the state.

“The average return on the projects is 7 to 8 per cent,” the vice-governor said.

Communities across the north of England are set to discover on Monday whether high-speed rail will cross their path as plans are unveiled for the second phase of the ￡33bn HS2 project, with councils and businesses hoping for stations in their cities while residents fear the effects of construction, blight and noise.

The transport secretary, Patrick McLoughlin, will be joined by the prime minister and cabinet colleagues as he outlines his proposed route for the Y-shaped network north of Birmingham to Manchester and Leeds. Well-placed sources believe the route will include a new spur to Crewe and run via Manchester airport, helping to bolster support in critical areas of the north.

Fresh controversy may be fuelled by deferring the Heathrow link that was one element of HS2's logic. David Cameron will stress that HS2 is a "vital engine for growth" while McLoughlin will promise that "HS2 will be woven into the transport fabric of the nation, accessible to all".

Extending the high-speed track to Crewe would mean big savings on journey times between London and Liverpool, where city leaders fear falling further behind Manchester in investment, as well as onward to Scotland. A stop at Manchester airport would help buy off the wealthy Cheshire set with a fast and accessible route to the capital, muting the kind of protests seen across the Chilterns, where residents face the disruption of high-speed rail with none of the benefits.

The other question is where stations will be on the eastern branch. Sheffield, the beneficiary of a promised South Yorkshire stop, may have to make do with a station on the fringes at the Meadowhall shopping centre. That would dismay those hoping it would help revitalise urban Sheffield: they say the transfer time would make the high-speed route slower than the Midland Mainline from London for the city centre. The deputy prime minister, Sheffield Hallam MP Nick Clegg, has described any stop in the vicinity as a "major victory".

A new "parkway" station in the east Midlands at Toton, on the edge of Nottingham towards Derby, is tipped to be the only other stop on the eastern branch to Leeds, as planners try to balance the demand for the new track to serve multiple cities with the time losses that would blunt the capabilities of high-speed rail.

However, the government is playing down the speed and time savings after a bruising experience selling the benefits of the first phase of HS2 were was derided by opponents as simply shortening the journey times between London and Birmingham. Instead it will stress the need for extra capacity, along with the economic benefits and tens of thousands of jobs that the new infrastructure will bring.

The prime minister will say: "Linking communities and businesses across the country and shrinking the distances between our greatest cities, high-speed rail is an engine for growth that will help to drive regional regeneration and invigorate our regional economies. It is vital we get on board the high-speed revolution."

He will add: "It is a catalyst that will help to secure economic prosperity across Britain, rebalance our economy and support tens of thousands of jobs."

A decision on building a high-speed link to Heathrow, originally destined to be part of the phase two announcement, is to be deferred until the Davies commission on aviation capacity has reported after the next election. Although the logic is to present an integrated transport strategy, HS2's opponents are likely to seize on the U-turn as more evidence that the plans are ill-conceived – and possibly as a basis for further legal challenge.

However, the government has confirmed that HS2 will immediately connect to Crossrail at a new Old Oak Common station in west London, speeding up links to the UK's main hub airport.

George Osborne, the chancellor, whose Tatton constituency lies on the expected route, is a crucial proponent in unlocking the ￡33bn spend. A source familiar with his thinking said: "The coalition's hope is that it will create a mega-city in the north. Osborne's like a CFO [chief financial officer] looking at his estate – when he looks at his country, he sees that half of it is overheated and the rest is struggling.

"When George goes to Japan, as he likes to do, he sees how the bullet train from Tokyo made Osaka a dramatically different place. And he's often looked at the fast trains on the southern seaboard of China – and he thinks, if only Leeds, Manchester, Rotherham, Barnsley, Derby could have the same sort of connections – if people who lived there could apply for jobs elsewhere, or potential clients in London could source business from those places."

Economists are divided on the benefits. Opponents point to studies of existing routes, such as France's TGV network, that suggest the biggest flow of economic gain would go to London.