China and the World

Speedy Victory

China beats Japan in Indonesian rail tender

china harmony bullet train

Heading for Jakarta

In 1978 Deng Xiaoping made a landmark visit to Japan seeking investment. During the trip he rode on Japan’s shinkansen, or bullet train. The Chinese leader described the high-speed experience in glowing terms, saying it was as though the train was “urging us to run, and for us that’s very appropriate”.

That same year Deng was about to embark on a revolutionary period of ‘reform and opening’ that would set the nation on the path to becoming the industrial powerhouse it is today.

News last week of China’s victory over Japan in a bidding war for Indonesia’s latest railway scheme would have pleased its former leader. That’s because China’s bullet trains won the bidding war against the shinkansen that once inspired Deng and decades later his country’s trainmakers (see WiC114).

The battle to link Jakarta and nearby Bandung by high-speed rail has had almost as many twists and turns as the line that currently links the two. Bids were invited for the project in the summer, with Chinese and Japanese firms the main contenders. Then the line was unexpectedly cancelled early last month. The Wall Street Journal reports the $5 billion project was scrapped as “it involved government financing rather than outside investment” and because the 93-mile stretch of track didn’t require a high-speed solution.

A revised proposal for a lower-speed train, which would cost 40% less, was opened for bidding. Then last week Japanese Chief Cabinet Secretary Yoshihide Suga announced that Japan’s updated bid had been declined – a situation he described as “deeply regrettable”.

Whilst the Japanese offer included a low-interest loan to the Indonesian government to cover the cost of the project, the winning Chinese bid requires no “government guarantees”. That seems to have been important, with Gartot Trihargo, an Indonesian official, praising the Chinese for having the “courage not to ask for guarantees from Indonesia”.

Analysts following the saga say the winning side will be well placed to develop further projects in the region. That seems to have motivated the Chinese side to continue to push the Indonesians to go for its (fully-financed” high-speed train, not the low to mid-speed rail connection Jakarta mooted last month .

The conclusion: China was determined that Indonesia be a test case for its ability to deliver high-speed rail lines in overseas markets.

According to Xinhua, Chinese Premier Li Keqiang has been striving to export China’s high-speed rail expertise since 2013. In mid-September, CRRC (the state’s largest rolling stock manufacturer, formed from a merger of CNR and CSR this year) struck a deal as part of a consortium developing a rail link with XpressWest, between Las Vegas and Los Angeles.

The XpressWest contract had been in discussion for several years, and Japan had also expressed interest, Bloomberg reports. But insiders say that China’s victories in railway deals over Japan are probably more indicative of its financial sway than its technical skills. In fact an official from Jakarta’s Ministry of State Enterprises described the decision to hire a Chinese firm as “based on the financial, not purely on the technical”.

“The financial package offered by the Chinese is way more interesting than the Japanese — there is no government guarantee whatsoever,” he delightedly told the Financial Times. “The project is nothing to do with the [Indonesian] government and it doesn’t involve any state budget at all.”

Selection on technical criteria alone would probably have favoured Japan in its recent bids. Its iconic bullet trains have been running for over 40 years, without a serious accident, AFP reports. China suffered a high-speed rail crash in 2011, which killed 40 people (see WiC117). That said, the safety record of Chinese bullet trains has been good in subsequent years (and defenders of their performance point out that China is running a lot more of them, across a lot more track, than Japan does today).

If it is completed on schedule the Jakarta-Bandung line is due to open in 2019 – a year ahead of the XpressWest line.

 

 

Keeping track: The Los Angeles Times reported on June 8 that the partnership between CRRC and XpressWest had been cancelled due to the Chinese firm’s “challenges in obtaining required authority to proceed with required development activities”. These challenges apparently arise from the fact that it is a federal requirement for all high speed trains running in the United States to be manufactured in the United States – but currently there are no manufacturing facilities.


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