Chinese Railways

Chinese Railways - Coming Soon to a City Near You

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China is making headlines for a new plan to build four international high-speed railway lines, including a 13,000km one to the United States. Although it makes for interesting reading, don’t expect the plan to come to fruition any time soon.

China’s Beijing Times reported that the four lines will:

1.       Start in north-east China, travel up through Siberia, pass through a tunnel underneath the Pacific Ocean then cut down through Alaska and Canada to reach the continental US.

2.      Go from London via Paris, Berlin, Warsaw and Kiev to Moscow, where it would split into two routes – one through Kazakhstan and central Asia and another through Siberia.

3.      Start in the north-western Chinese city of Urumqi and run through Kazakhstan, Uzbekistan, Turkmenistan, Iran and Turkey to Germany.

4.      Begin in the south-western city of Kunming and end in Singapore, traveling through Vietnam, Cambodia, Thailand and Malaysia.

.中文: CRH3 (Photo credit: Wikipedia)

From a domestic perspective, the lines certainly make sense. China has spent considerable time and effort to develop its capacity to manufacture and build high-speed railways and doesn’t want that going to waste. Initially, China’s plan was to build a comprehensive domestic network, and Xinhua reports that the main backbone lines of the domestic network will be basically completed by 2015, with 19,000km of ultra-high speed railways and 40,000km of total high-speed railways. With the major work finished next year (good picture of ithere), China is turning its sites to overseas projects.

This shift is also part of the nation’s efforts to improve the structure of its exports, moving up the value chain away from low-end goods. In a previouspost, I discussed China’s support for the domestic telecommunications industry as part of a plan to develop domestic expertise in producing high-end goods for export. In addition to telco equipment and railways, China also hopes to export nuclear power equipment and its power grid.

While the project may fit with domestic priorities, international cooperation could get tricky.

One of the biggest questions that must be raised is one of cost. Not only do these projects cover substantial distances, but also difficult terrain requiring complex engineering. For example, the China-US railway line would include a 200km long tunnel, five times longer than the Channel Tunnel between the United Kingdom and France. Lily Kuo at Quartz estimates that because of its complexity, the China-US tunnel could cost as much as $200 billion, based on previously disclosed expenditure figures for other projects.

China has already said that it would fund the projects. But here is the kicker: funding would be secured by local resources. All of a sudden, the outlook changes.

One can only imagine the public relations nightmare of the US Congress pledging oil or natural gas to China in exchange for China building this railway. That’s an easy one to shoot down.

But, perhaps, other projects are more feasible. Laos has already announcedplans to borrow $7.2 billion from China to fund this project, securing the loan with local resources. Although the Asian Development Bank has criticized the project as unaffordable as the cost is equivalent to around 90% of the country’s $8.3 billion GDP, it still looks set to go ahead.

The bottom line is that if countries are willing to give up resources, the Chinese railway lines will go ahead. Because of this, lines through central Asia and Russia are also possible, particularly as China is already importing large amounts of oil and natural from countries in the region. Last week, China inked a deal for a new plant to boost natural gas exports to China. Meanwhile, at a time when Russia is feeling the squeeze from U.S. and European sanctions over Ukraine, Reuters reports that Russian PresidentVladimir Putin will open his country up to Chinese investment during his visit to Beijing later this month. China certainly wants more natural gas and other resources from Russia, and it’ll be interesting to see if the railway lines come into play.

Beyond the four lines mentioned above, possibly the most promising region for China is Africa. Premier Li Keqiang, who just concluded a tour through Africa, has pledged $12 billion of new aid for Africa. According to Chinese state media, Li also offered to help with high-speed rail development. Li reportedly “depicted a dream that all African capitals are connected with high-speed rail, so as to boost pan-African communication and development”. Progress has already begun, with the China Railway Construction Corporation announcing a $13.1 billion deal to build a 1,385km high-speed railway in Nigeria that would employ more than 4,000 workers during construction, and 5,000 more afterward, according to theChina Daily. It followed this up with a $3.8bn line linking the Kenyan port city of Mombasa to Uganda, Rwanda, Burundi and South Sudan.

Of course, Africa also has plenty of its own logistical and political difficulties. But perhaps the need for better local infrastructure, combined with willingness to give up resources, will trump these issues. The same cannot be said for the more developed US and EU.

While many question marks still hang over all these projects, don’t be surprised to be hearing a lot more about Chinese railways in the not-too distant future.