Truly Transglobal

When， on November 7， Mexican President Enrique Pe？a Nieto canceled a high-speed rail（HSR） deal with a Chinese-led consortium including the China Railway Construction Corp and several Mexican firms， many saw the first major blow to China’s effort to export its domestically revolutionary HSR technology. The US$3.75 billion contract to build a 210-kilometer （130-mile） line con- necting Mexico City with the central city of Querétaro was China’s first such deal in Latin America， and prompted an outcry from Mexican lawmakers when it was announced less than a week earlier.

Few， however， believe that this setback will halt what many have termed China’s “highspeed rail diplomacy” drive， as the country endeavors to shift its national growth strategy away from labor-intensive， low-end manu- facturing to the higher end of the global market.

Expansion

With its first HSR line completed in 2008， China’s domestic network surpassed 11，000 kilometers of track within just six years， utterly transforming travel in a country heavily dependent on rail to move both its goods and its people. With 49 new projects totaling 7，000 kilometers of track currently underway， it is estimated that China will have an 18，000-kilometer HSR network by the end of 2015.

Besides domestic expansion， China has also endeavored to export HSR technology as part of its diplomatic outreach to other nations. Dubbed China’s leading high-speed rail “salesman，” Premier Li Keqiang has been actively promoting Chinese HSR technology on his overseas visits.

On an official visit to Thailand in October 2013， Li inaugurated an HSR exhibition in Bangkok alongside then Prime Minister Yingluck Shinawatra， signing a memorandum of cooperation on a US$23 billion project that will link a fledgling Thai HSR network to China’s by 2021. Although the project was suspended after Shinawatra was deposed in a bloodless military coup， Thailand’s current ruling junta reactivated the project this August.

During a trade forum held in November 2013 in Bucharest， China announced a HSR project in Romania and also inked a partnership agreement with Hungary and Serbia to build a line connecting Budapest to Belgrade.

During an African tour in May 2014， the Chinese Premier attended the World Economic Forum on Africa， joint research projects were announced on HSR technology， with delegates mooting a vast network connecting several African capitals.

China has long been a major player in the market of railway and infrastructure construction in Southeast Asia and Africa. Now， the country has broadened its scope to include Europe and the Americas， hoping that growing demand for HSR networks in developed economies may disperse previous anxieties about welcoming Chinese investment.

In his visit to London in June， Premier Li signed an agreement with British Prime Minister David Cameron to promote bilateral cooperation on the design and expansion of an extended rail network， including HSR， which analysts believe will pave the way for Chinese enterprises to add impetus to HS2（High Speed 2）， a major infrastructure project aimed at establishing an HSR link between London and the north of England.

During his visit to India earlier in September， President Xi Jinping signed an agreement with Prime Minister Narendra Modi， which will see China investing US$20 billion in India’s infrastructure over the next five years， including the addition of HSR lines to the country’s rail network.

On October 23， the United States approved cooperation between the Massachusetts Department of Transportation and China North Vehicle Group （CNR）， China’s other rolling stock giant， to purchase 284 subway trains for the Boston area. Although these trains are not technically high-speed， it is the first time that a Chinese rail company has won a bid for a contract in the US. Both China South Locomotive and Rolling Stock Corporation Limited （CSR） and CNR have indicated their interest in supplying rolling stock for California’s proposed US$68 billion HSR network， with its first line between Fresno and Bakersfield scheduled to open in 2021.

Global Ambitions

Besides cooperation with individual countries， China has also proposed several international and even intercontinental high-speed railways. The first to open may be a 3，000-kilometer railway line linking Kunming， capital of Yunnan Province in southwestern China， to destinations in Laos， Thailand， Malaysia and Singapore. The high-speed rail project recently restarted by leaders in Bangkok is believed to be phase one of this grand project.

According to Zhao Xiaogang， an adviser to the China Institute for Innovation and Development Strategy and the former chairman of CSR， China aims to finish this transnational project， which will have an estimated cost of US$75 billion， by 2025.

An even more ambitious is a 6，000 kilometer line linking China’s Xinjiang Uygur autonomous region with Eastern Europe， passing through Kyrgyzstan， Tajikistan， Uzbekistan， Turkmenistan， Iran， Turkey and Bulgaria. Few proposed projects follow China’s global economic strategy as closely as this rail line， which traces almost exactly the investment path of the government’s muchvaunted “New Silk Road” initiative launched by the central leadership under President Xi Jinping in 2013.

During Premier Li Keqiang’s visit to Moscow in October， China proposed yet another grand project to build a 7，000-kilometer HSR line from Moscow to Beijing， which would cost about US$230 billion and cut the journey time of today’s Trans-Siberian Railroad from six days to two. The two sides signed a memorandum of understanding re-garding building Phase One of this proposed project an HSR link between Moscow and Kazan， the first leg of the Trans-Siberian Railroad.

National Strategy

Many analysts believe that China’s “highspeed rail diplomacy” is part of a national strategy inspired by the US Marshall Plan of the 1940s. Officially called the “European Recovery Plan，” the Marshall Plan was an unprecedented package of financial， logistical and military aid provided to the devastated nations of Europe in the wake of World War II. A byproduct of the plan， which some claim was its main intention， was establishing strong overseas markets for American goods， securing US influence in most major world markets and placing the dollar at the heart of global trade.

In 2009， Xu Shanda， former director of the State Taxation Administration， proposed that China should learn from this example to engineer a “Chinese version of the Marshall Plan.”

According to Xu， China is comparable to the postwar US， suffering an excess of production capacity and vast foreign exchange reserves with limited investment channels. By offering financial assistance to infrastructure projects in both developed and developing countries as well as emerging markets， China can achieve multiple strategic objectives.

Not only would building a global HSR network help China absorb its excess capacity and sustain its flagging domestic economic growth， it could also accelerate the pace of the internationalization of China’s currency， increasing the yields on its foreign exchange reserves， reducing its holdings of US treasury bonds and guard against long-term depreciation in value of the US dollar. Moreover， with an increased presence in an in-demand hightech market， China can boost its soft power and enhance political and security cooperation with partner countries.

Although Chinese officials have denied that the government has adopted this strategy， many commentators， both domestic and foreign， have made comparisons to the Marshall Plan， pointing to the fact that Chinese financial initiatives are increasingly tied to infrastructure projects.

Besides low cost and rapid construction， a key advantage of Chinese HSR manufacturers is the virtual guarantee of State-backed funding. In the Mexican deal， for instance， the Export-Import Bank of China （EximBank） offered to finance 85 percent of the project.

On October 24， 2014， China， along with other 20 countries， established the Asian Infrastructure Investment Bank， with China providing the bulk of an initial fund of US$50 billion， which Chinese officials say will soon reach US$100 billion. On November 9， that same year， during the APEC summit held in Beijing， President Xi Jinping announced that China will invest US$40 billion in establishing a “Silk Road Fund” to finance its Central Asian initiatives..

Then， when ASEAN leaders met in Myanmar the weekend after the APEC summit， Premier Li Keqiang announced that China would provide US$10 billion in loans to ASEAN countries， also allocating another US$10 billion fund to EximBank to finance infrastructure projects in the region. Roads， ports and， crucially， HSR projects will be financed by these initiatives.

Mergers

Under its national strategy， the Chinese government is reported to be encouraging a merger between CNR and CSR in order to boost competitiveness with major international HSR firms such as Bombardier（Canada）， Alstom （France） and Siemens（Germany）.

It is argued that the two Chinese companies have engaged in a fierce price war on overseas markets which has undermined China’s overall strategy. In 2011， for example， the two companies undercut one another in bidding for a Turkish contract， which eventually went to a South Korean firm. Then in 2013， after CSR bid for a rolling stock contract in Argentina， CNR offered a vastly lower price， leading the Argentine government to cast doubt on the credibility of both companies.

On October 27， the two State-owned companies suspended the trading of shares. With total annual revenue of 131 billion yuan （US$21.4bn） and 98 billion yuan（US$16bn） respectively and combined profits of US$1.4 billion in 2013， the merger， if successful， would give birth to the world’s largest rolling stock manufacturer， fundamentally changing the international market.

Challenges

Regardless of the aims of its policies， however， China also faces serious political and economic challenges in achieving its stated objective of a global HSR network centered on the People’s Republic.

Industrial analysts are warning that China’s high-speed rail diplomacy， along with the proposed merging of CNR and CSR， will inevitably lead to an intensified diplomatic fightback.

Others warn that it would be very difficult for China to replicate the success of the Marshall Plan， given that it is not the sole player in a global market that， while somewhat stagnant， is far from the devastated wasteland left in the wake of WWII. In an article published on political analysis website The Diplomat， Dingding Chen， assistant professor of Government and Public Administration at the University of Macau outlined four major differences.

Unlike the US， which was already a global dominant power in the 1940s， China is a rising and developing power， already perceived as a direct challenge to US supremacy， a status which will inevitably be combated by American maneuvering. Moreover， while the Marshall Plan was conducted between the US and its European allies， China’s initiatives are open to almost all countries， meaning a “free ride” for those seeking to profit from infrastructure deals while remaining strategically and economically aligned with US interests. In addition， China still faces trust issues in many markets， as evidenced by the collapse of its Mexican rail initiative.

Chen argues however that China’s advantage lies in that it understands “the key desire of many developing countries： They want development first， and they want development without the political strings imposed by the West.”

“China needs to work harder to convince others that its initiative is indeed aimed at achieving a ‘win-win’ outcome for everyone，” he concluded.