US rail deal ter­mi­na­tion a valu­able les­son

China Daily (Canada) - - LIFE -

XpressWest En­ter­prises, a pri­vate US rail­way com­pany, uni­lat­er­ally ter­mi­nated a deal with China Rail­way In­ter­na­tional on Jun 8 to build a high-speed rail­way line from Los An­ge­les, Cal­i­for­nia, to Las Vegas, Ne­vada.

Just nine months ago, XpressWest had an­nounced that CRI, the Chi­nese con­sor­tium made up of sev­eral State-owned rail­way equip­ment sub­sidiaries and ser­vice providers, would build the 370-kilo­me­ter rail­way. The work on the pro­ject was sched­uled to start in Septem­ber and to­tal in­vest­ment was es­ti­mated to be $12.7 bil­lion.

China Rail­way Corp, CRI’s main share­holder and the coun­try’s rail­way ser­vice provider, will take all nec­es­sary mea­sures to en­sure that its in­ter­ests in the United States are pro­tected, a con­sor­tium of­fi­cial has said.

The US rail­way com­pany’s ac­tion came at a time when Don­ald Trump andHi­lary Clin­ton seem set to win the Repub­li­can and Demo­cratic nom­i­na­tion race to face off in the Novem­ber pres­i­den­tial elec­tion, prompting some to see a link be­tween the two events.

The truth, how­ever, is that CRI will face sim­i­lar speed bumps with or with­out the elec­tions. It is its com­pet­i­tive­ness in run­ning high-speed trains that US trade pro­tec­tion­ists are afraid of. And that is also the rea­son why XpressWest sud­denly backed out of the deal, al­though it said its de­ci­sion was based on “the fed­eral gov­ern­ment’s re­quire­ment that high-speed trains must be man­u­fac­tured in the United States”.

No high-speed trains are “man­u­fac­tured” in the US, at least un­til now. XpressWest should have ac­knowl­edged the “fun­da­men­tal bar­rier” at home when it signed the agree­ment with CRI. Ap­par­ently, the US com­pany lacks the sin­cer­ity to co­op­er­ate with a Chi­nese en­ter­prise in a promis­ing rail­way pro­ject, even if the lat­ter has the ca­pa­bil­ity and ca­pac­ity to pro­vide sound tech­no­log­i­cal sup­port at rel­a­tively low costs.

The US does need Chi­nese in­vest­ments to cre­ate more jobs for its peo­ple, and it has granted less com­pet­i­tive Chi­nese en­ter­prises, like those in the ser­vice and agri­cul­tural in­dus­tries, eas­ier en­try into its mar­ket.

Al­though the ter­mi­na­tion of the rail­way pro­ject is un­likely to deal a blow to China-US ex­changes, it is worth not­ing that Bei­jing’s pro­mo­tion of its high­speed rail­way busi­ness has made lit­tle progress over­seas, es­pe­cially in North Amer­ica, while fac­ing fierce com­pe­ti­tion from Tokyo, a global leader in build­ing and run­ning high-speed trains, in Asia.

Chi­nese rail­way com­pa­nies are still learn­ing how to “go global” and ef­fi­ciently in­te­grate into the coun­try’s Belt and Road Initiative. Many of their of­fers were ei­ther turned down or tem­po­rar­ily stalled be­cause some coun­tries had cer­tain con­cerns over Chi­nese in­vest­ments or for the lack of long-term plan­ning for over­seas rail­way projects.

To avoid re­peat­ing such mis­takes, all com­pa­nies pro­mot­ing China’s high-speed rail­way projects over­seas should base their in­vest­ment on fea­si­bil­ity and the real mar­ket de­mand, in­stead of blindly seek­ing to re­duce their over­ca­pac­ity.

In par­tic­u­lar, they have to abide by other coun­tries’ laws and reg­u­la­tions on for­eign in­vest­ment while seek­ing closer co­op­er­a­tion with lo­cal gov­ern­ments and en­ter­prises, as well as take pre­cau­tions to deal with fore­see­able in­sti­tu­tional fric­tions, even though the Chi­nese gov­ern­ment is ob­li­gated to pro­vide the nec­es­sary diplo­matic pro­tec­tion for the com­pa­nies’ le­gal in­ter­ests and rights.

The au­thor is a re­searcher at the China In­sti­tutes of Con­tem­po­rary In­ter­na­tional Re­la­tions. The ar­ti­cle is an ex­cerpt from her in­ter­view with China Daily’s Cui Shoufeng.

WANG XIAOYING/ CHINA DAILY

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