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Firms Entangled in Duel for Railway Bid

The Beijing-Shanghai high-speed railway is still at approval stage by central government, but international firms are making last ditch efforts to win the order.


The designs and schemes of the project are waiting for approval from the State Council, and then for last nod from the National People's Congress, said Sa Shuli, professor with Beijing Jiaotong University and consultant to the Ministry of Railways.


But he said it is hard to tell the exact time of the final approval.


French giant Alstom Chairman and chief executive officer Patrick Kron said in Paris that the firm is willing to transfer its "complete technology" to China, which could give Alstom a huge advantage in winning the order.


That means Alstom will help Chinese enterprises to produce the same high-tech trains as it does itself.


Earlier last month, Alstom China's vice-president Lu Yuebing said the firm is confident of winning the bid with its TGV (French high-speed train) technology.


The company is capable of providing trains carrying 1,000 passengers at a speed of 350 kilometers per hour, Lu said.


"We have a fine record of the transfer of core technologies," he said and strongly recommended Chinese policy-makers to visit South Korea to see the Korea Train eXpress (KTX).


The KTX project, which adopts TGV technology, has helped Korean companies to develop their own innovations on the basis of Alstom's technology, Lu said.


The French Government is also showing great support for the cooperation.


The upcoming visit by French President Jacques Chirac in October is believed to be a critical time for TGV technology in China, since French senior train officers will join the trip.


The reason why the project attracts so much attention lies in the huge input: more than 100 billion yuan (US$12.08 billion). It is China's second largest project in history, only after the Three Gorges Dam in terms of the investment scale.


The 1,300-kilometer passenger-only high-speed railway, will enable trains run at 250 to 300 kilometers an hour, which will reduce the travel time between Beijing and Shanghai from the current 12 hours to 4 to 5 hours.


Currently there are three options for the line: France's TGV, Japan's Shinkansen and Germany's ICE, which are perceived as the most advanced high-speed rail technologies in the world.


Behind this is a decade's competition between Alstom of France, Siemens of Germany and the Japanese consortium that produces Shinkansen.


The Japanese side is confident because of its Asian background.


"We have abundant experience in large capacity transportation and high-density operation," said a staff member with Sumitomo Corp, China Branch.


He further explained that China and Japan are similar in terms of density of population in cities.


In addition, Japan, which first developed its Shinkansen in 1959, has the longest history in developing and maintaining high-speed railways, he said.


The first Shinkansen was completed in 1964, while the high speed railways in France and Germany were finished in 1981 and 1988.


A consortium has been established by Japan's three largest trading conglomerates, Mitsubishi, Sumitomo and Mitsui, in order to win the bid. Furthermore, famous Japanese machinery manufacturers, such as Kawasaki Heavy Industries Ltd, Hitachi Ltd, Mitsubishi Electric Corp support the consortium with their latest technology.


"The Shinkansen operates smoothly in Taiwan, and we are confident about a success in the Chinese mainland," he said.


The German firm, Siemens AG said it is bidding for China's current railway acceleration project, which is widely seen as a prelude to the bigger deal of the Beijing-Shanghai railway order.


Dong Jianmei, a public relations staff with Siemens' railway division said the firm has been making every effort to win the order.


The winner will help China raise its train speed on five major existing railway lines to 200 kilometers per hour.


The five train lines include one between Beijing and Shenyang, Northeast China's Liaoning Province, and another to connect Qingdao and Jinan in East China's Shandong Province.


"We have been working with China's railway authorities since the 19th century, and the cooperation has been very pleasant. And we believe the Chinese government will make a wise decision (on the projects of both acceleration and Beijing-Shanghai railway)," Dong said.


While the global giants are speaking out about their advantages, the Ministry of Railways has declined to comment at the current stage, saying it is too early to say anything. They said it will inform the public as soon as result is decided.


Analysts suggest such a huge project will not be given to a single firm or a single country.


"What the ministry will do is to probably introduce part of the technology, and take advantage from various aspects," Sa said.


He said that when it comes to strategically-important projects, many factors should be considered, not only the aspect of technology, but also political and national defense factors.


"Shinkansen is advanced in terms of technology, Germany, as a traditional manufacturing country, has many companies equipped with comprehensive and complete management system, such as Siemens," he said.


France-base Alstom is also competitive in the sector, Sa said.


"For the high-speed railways, Chinese firms are only competent at laying rails, while other technologies, such as producing locomotives and cars, maintaining and operating railways and trains still rely on foreign firms," Sa said.


China currently can construct railways and produce trains with the speed of 160 kilometers per hour, and the country is accelerating the existing 73,002-kilometer-railway network, according to Sa.


The existing Beijing-Shanghai railway is under the most pressure among the whole railway network in China because of the logistics between the largest two cities in the country.


There are only two railways for the double direction. Passenger trains and freight trains run on the same rail.


The aim for passenger trains is a high speed and comfortable journey, while freight trains target carrying more cargo.


"The different targets make two types of trains sacrifice between each other, which influences the efficiency of the line. It is absolutely necessary to construct another Beijing-Shanghai railway," said Shi Lixin, director with the Institute of Economy Structure and Management of the National Development and Reform Commission.


Railways have advantages over road in land saving and large transportation capacities. Trains consume an environmentally friendly energy -- electricity -- which is cheaper than the oil that trucks and airplanes consume.


China, with the world's largest population should develop the railway network, Shi said.


The Ministry of Railways started planning the project in 1994.


There was a heated debate on introducing maglev technology on the line.


Maglev trains may deliver a speed of 450 to 500 kilometers an hour. But due to its huge cost and technology problems, the suggestion has been thrown out.


For comparison between the maglev train and a rail train, the former's construction cost for one kilometer is three times higher, but its transport capacity is only half of the latter, and the ticket price is five times higher.


There is so far no long distance maglev railway in the world.


Shi agrees with the government's cautious moves on the project, since "every aspect should be taken into consideration."


(Business Weekly August 17, 2004)


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