China Bidding for High Speed Rail Projects in the US

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Global Trade

China has enjoyed some dubious distinctions over the years. Their railways have been notoriously unsafe and railway stations are typically dirty and dangerous places after dark. But that is changing and as with much in China it is changing fast. Modern China railways will be the world’s biggest high speed network within five years according to an FT article.  So fast and so far reaching are the expansion plans, said to reach 30,000 kms (18,000 miles) of track, that even China’s airlines are feeling the impact. In 2009, 230 million people caught flights within China and numbers were predicted to treble by 2020 on the basis of which the country has invested and continues to invest billions in new airports. 22 have been upgraded or built as a result of the current stimulus program and 25 are planned for the next phase. Meanwhile air carriers are cutting services wherever the new high speed rail lines commence operation. The newly opened Xi’an to Zhengzhou 505 km service saw within two weeks the cancellation of both China Eastern and Air China’s services between those two cities as passengers deserted them in droves. Not only is the rail service cheaper, it travels from city center to city center unlike the new airports which can be up to an hour out of town on a motorway spur and they are more punctual and reliable. As the high-speed rail network grows, analysts expect airlines to pull off routes of 500km or less, while up to 40% of air passengers traveling between 500km and 800km will switch to rail. This mirrors a similar trend in Europe over the past two decades as high-speed rail networks have expanded and it is hoped will happen between the centers of America’s planned HSR projects.

Back in January, the Economist ran an article on China’s High Speed Rail (HSR) network saying it was expected later this decade that once the domestic market had become saturated, China’s construction and rail companies would jointly go after export contracts. The western rail companies like France’s Alstom, Germany’s Siemens and Japan’s Kawasaki probably also thought they had 5-10 years of grace after essentially handing over their technology in return for a part of the domestic projects. But no, China is already bidding aggressively for Saudi Arabia’s $7bn Medina to Mecca HSR route, and the $ 8bn HSR projects in Florida, Texas and parts of the Midwest. It is also pitching to build the high speed line through the desert from Los Angeles to Nevada supported by billions of dollars of Chinese government soft loans to authorities in California and Nevada to help pay for it.

A surprising competitor to the Chinese comes in the form of the world’s oldest and arguably most successful HSR operator Central Japan Railways. You would be excused for never having heard of them, since starting in the early 60’s they have not competed in rail projects outside their native Japan as that country has gradually built it’s domestic network to 2400 kms of super safe highly energy efficient high speed trains. And there in lies CJR’s gripe against the Chinese. They say their cost base is from the ground up starkly different from their Chinese competitors. The oldest and busiest Shinkansen corridor Central Japan Railway’s 550km Tokaido line, which connects Tokyo with the western city of Osaka carries 400,000 passengers a day and has run since 1964 without a fatal accident. The average delay last year was 36 seconds, with most of that caused by typhoons. In a hard hitting statement Yoshiyuki Kasai, chairman of CJR, told the Financial Times “The difference between China and Japan is that in Japan, if one passenger is injured or killed, the cost is prohibitively high, it’s very serious. But China is a country where 10,000 passengers could die every year and no one would make a fuss. There is a cost to that level of safety.

Although we wouldn’t put it quite in those terms, it is true to say China’s railways do not have the best safety record. In April 2008, 72 people were killed and 416 injured in an accident on a line in Shangdong province, while in June of last year 3 people were killed and 63 injured in Hunan. The authorities expectation may be that with western track design, signaling, software and train technology, such horrendous accidents may be a thing of the past. Let’s hope if they are successful in their bids in the US that they are right.

–Stuart Burns

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