China’s High-speed Railways Go Global

By Xu Hao



China’s High-speed Railways Go Global

By Xu Hao

In recent years， with CSR and CNR as key representatives， China's export of rail equipment has rapidly expanded，including locomotives （both electric and diesel）， passenger coaches， freight cars，high-speed train units， subway equipment and accessories parts， according to Mei Xinyu， a researcher from an institute under the Ministry of Commerce.

The rail sector is indeed competitive and much experienced.

Behind this fast progress is world-wide acknowledgement for the quality of the products and operational management of Chinese enterprises.

Chinese enterprises can help with a packaged service from financing，technology and equipment supply to engineering construction and operations management， and this is proving very attractive in foreign markets.

Orders Keep Coming

Propelled by “high-speed rail diplomacy”， Chinese enterprises have received record orders in the last few years.

In August 2013， Argentina approved a contract with a company under CSR for the import of a billion dollars' worth of railway equipment. This was the biggest order a Chinese enterprise ever received from a South American country， involving the largest government backed project in Argentina.

On October 28， 2013， news came from CSR： another contract had been signed for the supply of 21 subway passenger coaches to the southern branch of the Gurgaon Subway. This is actually the third order CSR has got from India， following previous ones from Mumbai （Bombay） and Gurgaon.

Towards the end of October 2013， CSR announced a deal to sell bogies for 50 highspeed train units to Italy. This contract meant a big step forward for Chinese enterprise in the European market.

In April 2014，CRCC began to lay track in Venezuela. This is the first such project for a Chinese high-speed rail enterprise in South America. Tis 471.5-km line is designed for a top speed of 220 kph. Te contract value could reach US$7.5 billion.

From the very beginning， surveying，designing and equipment purchase to construction， CRCC did everything. It is a fine example for Chinese high-speed rail technology “going abroad as a feet， and no longer as an individual ship.”

In 2013， China signed a series of agreements with ASEAN countries： an agreement with Indonesia for US$20 billion of investment， including US$1.5 billion for a 30-kilometer monorail in Jakarta and a US$16 billion agreement with Malaysia for trade in 2017， including a high-speed railway from Kuala Lumpur to Singapore.

Phase two of Ankara-Istanbul Highspeed Railway in Turkey.

According to incomplete statistics，since 2014， the railway contract value signed for projects in other countries has reached 12 billion Yuan for CNR and 16.5 billion Yuan for CSR. The countries involved are Singapore， South Africa，Australia， Argentina， Philippines and Ethiopia.

According to a CNR source， while making high-speed train units， passenger coaches and freight cars， both CSR and CNR have developed other product lines like light-rail vehicles to create a well balanced three-legged business structure.

Apart from the orders received for equipment， China's enterprises are doing well in project contracting. According to CRCC figures， by the end of 2013， it had received contracts valued up to US$53 billion， of which just under half the work has been completed.

CRCC data shows the value of new contracts signed in 2013 reached 853 billion Yuan， an 8.1 percent year-on-year increase. In the first half of 2014， the new contract value totaled 389.8 billion Yuan；51 percent of the work has been completed，including 129.1 billion Yuan for railway construction.

CRCC sources say Chinese enterprises have got contracts from some 50 countries and regions. Almost all continents have railway construction projects using Chinese equipment and parts.

Railway Building plus Financing

A high-speed rail project is expensive，and is beyond the financing capabilities of many countries. Chinese enterprises can help with a packaged service from financing， technology， equipment supply to engineering construction and operations management and this is proving very attractive in foreign markets.

According to Du Ping， a commentator with Phoenix Satellite TV， China's success in Europe is due not just to reliable technology but also its enormous foreign exchange reserves that can provide fnance for any country in need. “Tese countries，”he continued， “are EU members. France and Germany have good technology， so why are fellow EU members reluctant to use them？ Because China can provide the funds they need. EU is short of money， as are Southeastern Asian countries. Theirfund needs are huge. Japan can provide part of it， but China can do more.”

Phase two of Ankara-Istanbul High-speed Railway in Turkey.

Turkey is a fne example. When it was unable to fnd US$1.27 billion for the second phase of its high-speed rail project， the Export-Import Bank of China stepped in with a loan of US$720 million. On April 20， 2014， CNR signed an agreement with EIBC for strategic cooperation valued at 30 billion Yuan. Most of the amount was for loans to CNR's foreign customers， and there was no risk because all the projects involved were covered by local government credit guarantees.

In May 2014， during a speech delivered to the World Economic Forum African Summit， Premier Li Keqiang said China was willing to provide fnancial， personnel and technological help unconditionally to Africa in high-speed rail， highway network and regional aviation development.

In July 2014， Brazil， Russia， India，China and South Africa announced the founding of a new development bank. Te initial capital subscribed was up to US$50 billion， 20 percent of which came from China's foreign exchange reserves. Te new bank will fnance high-speed rail projects in their countries， which means China is now providing fnancial help to other countries via an international fnancial institute.

Through the railway building plus financing mode， China provides a loan while the country concerned offers local resources in return - a form of barter trade. In Tailand it was rice for high-speed rail. Some Central Asian countries trade their oil and natural gas for a long-term cooperation.

In regard to 85 percent of the highspeed rail projects in foreign countries China does not get money back， but local resources instead. Only 15 percent have cash in return. Tis mode of cooperation is called “diplomacy in Zheng He style”. Tis refers to Zheng He （1371-1433）， who was sent by the Ming Dynasty emperor to many countries to trade.

Officials from the former Ministry of Railways explained this cooperative mode as follows： “It is a fair game when China is building a high-speed rail for other countries and gets paid by either cash or local resources.”

In regard to 85 percent of the high-speed rail projects in foreign countries China does not get money back，but local resources instead. Only 15 percent have cash in return. This mode of cooperation is called“diplomacy in Zheng He style”.

Export of Products plus Service

So far， the items exported by Chinese high-speed rail manufacturers are mainly train units. It is often a “one-time deal”. Things are changing， however， because Chinese manufacturers have turned their eyes to after-sale service like equipment maintenance， sales of spares and accessory parts and personnel training. Products plus service is more prevalent than before.

CSN sources say that， for safety and endurance concerns， all high-speed trains must be examined every day， and afer one year， fve years and 10 years from their frst use they must undergo thorough maintenance. The service provided at regular interval is also a “cash cow”.

A UN report published in March 2014 said the sales of global rail transit were up to US$188 billion， equally divided between products and after-sale service. CSN already provides the latter in Malaysia， South Africa and Turkey. The service includes equipment maintenance， spares and accessory parts supply and personnel training.

Operation management， CSN admits，is not its strong suit； proftable equipment maintenance will be.

In the next fve years， it believes， just in Southeast Asia alone， 1，100 trains will be needed and another 700 already in service will have to undergo refurbishment. It is a huge market， in which China will be dominant. CSN has established a production and after-sale maintenance center in Malaysia to take care of the customers in Southeast Asia.

Such service involves different trades and manufacturers. It boosts the industrial chain in China. So far， the the trains exported by CSN have involved contributions from 18 train manufacturers， 1，200 manufacturers for spares， 200 instrument makers， 1，000 sof and hardware developers and large amount of consumable item suppliers.