Alstom, front runner in China's railway bidding

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Last updated at: (Beijing Time) Thursday, February 26, 2004

Alstom, front runner in China's railway bidding

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France's Alstom has apparently become the front runner in the competition to construct the US$12-billion, high-speed Beijing-Shanghai railway. It will be some time, however, before the winner is announced.

Compared with its competitors, the French company is stronger in terms of technology and political contacts, railway expert Jia Huijuan told China Business Weekly.

Jia is a professor at Beijing Jiaotong University, the nation's top post-secondary railway technology school. She has also edited several books on high-speed railways.

But Alstom's advantages might not translate into a construction deal, said Qiu Yuanlun, director of the Institute of European Studies under the Chinese Academy of Social Sciences (CASS).

"President Hu Jintao said last month during his visit to France that 'we welcome French companies to participate in China's economic development through competition'," Qiu added.

"This is evidence the Chinese Government has not yet selected Alstom ... to do the project."

Earlier this month, Hong Kong-based newspaper Ta Kung Pao reported China had decided to use the French TGV technology - owned and operated by Alstom - for the planned 1,300-kilometre, high-speed railway between Beijing and Shanghai.

Officials with China's Ministry of Railways have denied that report. They said any decision will be made through a fair and open international bidding process.

The call for tenders is expected to take place in the year's second half.

Alstom denied the report. "No contract has been signed," a spokeswoman with the French company said last week when contacted in Paris.

Jia said the newspaper's report reflected the opinions - which are becoming increasingly prevalent - of several railway experts and officials.

Decision still pending

The high-speed railway will shorten the travelling time - from 13 hours to less than five hours - between Beijing, China's capital, and Shanghai, the nation's financial hub.

Alstom and companies from Germany, headed by Siemens, and Japan, headed by Mitsubishi Heavy Industry, are vying to build the high-speed railway.

The German consortium, which began operating a maglev line in Shanghai in 2002, had appeared to be the front runner until trials of the maglev line were suspended last year after technical errors were detected.

The maglev line resumed operations last November, but, last month, media reported the State Council, China's cabinet, ruled out the possibility of using the maglev technology for the Beijing-Shanghai line.

The Chinese Government neither confirmed nor denied the report.

Experts suggested the extremely high costs - which have prevented the worldwide adoption of the maglev technology - have surpassed the project's anticipated costs.

Experts estimate it will cost between US$36 million and US$48 million per half mile, twice the cost of a traditional rail line, to construct a maglev line between Beijing and Shanghai.

Among builders of traditional railways, Alstom's TGV has led its Japanese and German counterparts, in terms of technology and safety, Jia told China Business Weekly.

The first TGV in France was put into operation in 1981.

Sources with Alstom's Beijing branch said the French company has mastered the 300-kilometre-per-hour technology.

The high-speed train has run safely for 2 billion kilometres.

Although its actual service life is shorter than that of Japan's shinkansen technology, TGV can travel 300 kph (kilometre per hour), faster than any other high-speed train in the world.

Alstom is also willing to transfer the high-speed train technology to China, and to set up joint ventures in China to produce high-speed trains, company sources said.

Germany's high-speed wheel-track lines, the ICE-3 series, were put into commercial operation only in 1999.

However, ICE's technologies are not as mature as TGV, Jia said.

The German consortium mainly promoted the maglev technology, and that has reduced, substantially, its chances of winning the contract to build the wheel-track high-speed line, experts said.

But Japan's shinkansen is presenting a strong challenge to the TGV technology.

The construction and operational costs of the shinkansen would likely be lower than those of the TGV, and the Japanese firms operating the high-speed railway are highly profitable, Jia said.

The Japanese companies have another advantage: China's quasi, high-speed railway - with an average speed of 200 kph - between Shenyang, in Northeast China's Liaoning Province, and Qinhuangdao, in Hebei Province, was built mainly with Japanese technologies.

The line has widely been viewed as a trial for future high-speed railways in China.

The Japanese Government has aggressively supported its companies' efforts to build a shinkansen line in China.

Several Japanese ministers, including a former prime minister, have visited China since last year to promote Japan's technology.

The Japanese Government also promised to offer low-interest loans to China if the Japanese firms won the contract.

But Japanese Prime Minister Junichiro Koizumi's decision to visit the Yasakuni Shrine, in which memorial tablets of Japan's war criminals are kept, has caused Chinese leaders to think twice about awarding the contract to Japanese firms, Zhang Shuying, an economist with the Institute of Japan Studies, told China Business Weekly.

The repeated visits to China by Japanese ministers might be a waste of time given Koizumi's visit to the Yasukuni Shrine, Zhang added.

Qiu agrees.

Political relations between nations certainly play an important role in a nation's decision to award billions of dollars in contracts, Qiu said.

During his state visit to France late last month, Chinese President Hu Jintao and his French counterpart, Jacques Chirac, signed a joint declaration that pledged to deepen the comprehensive strategic partnership between the two countries.

But the warmer relations between China and France does not ensure Alstom will win the deal, said Qiu.

Source: China Business Weekly

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