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Ma Xiaolin
Let the Bullet Trains Fly
Will China be able to outstrip Japan's established railway technology in the race for the Indonesian market?
By Ma Xiaolin | NO. 36 SEPTEMBER 3, 2015

A high-speed train comes off the assembly line at a plant owned by Changchun Railway Vehicles Co. Ltd. in Changchun, capital of northeast China's Jilin Province, on August 23 (XINHUA)

 
Given the brutal magnitude of the capital and technological outlays required for entry into the rail market--a characteristic that drastically reduces the number of competitors--the industry is neither for the faint of heart nor those limited in ambition. The industry is inextricably tied to notions of progress in fledgling economies, as railways serve as the economic circulatory system in any given economy (just think how emblematic railways are for the American Old West). It is not for nothing that Ayn Rand made this primal industry the setting of her 1957 pro-capitalist novel Atlas Shrugged .

Close to 60 years since that work's release, very little in the industry has changed, save the sophistication of technology employed. While the Jakarta-Bandung Railway project is still at the planning and design stage, competition in bidding for the project is already proving fierce. On August 10, Xu Shaoshi, head of China's National Development and Reform Commission, acting as special envoy of Chinese President Xi Jinping, met with Indonesian President Joko Widodo and delivered a feasibility report and a five-point cooperative proposal for the Jakarta-Bandung Railway, Indonesia's first high-speed line linking the titular cities.

It was the first time that China had sent a presidential envoy to present a report of this nature, demonstrating the extraordinary priority that China is attaching to this project. China is not alone in this regard. Other international competitors--including Japan--are also eyeing the order, and the heads of government of both China and Japan have pointedly promoted their respective high-speed rail industries during recent foreign visits.

Picking up steam

The planned Jakarta-Bandung Railway links Jakarta, the capital of Indonesia and home to 9.16 million, and Bandung, the third biggest city in Indonesia with a population of 1.7 million. When the high-speed railway is complete, it will extend from Bandung to Surabaya, Indonesia's second largest city, which lies 570 km away from Bandung and has a population of 3.6 million. Thus the high-speed railway, which will boast eight stations and a length of approximately 150 km, will benefit the three cities and the areas lying between them.

If measured at a speed of 350 km per hour, the railway is expected to cut travel time between Jakarta and Bandung from the current three hours to a mere 36 minutes. The one-way fare is projected to be a very reasonable 200,000 rupiah ($20). For Indonesia, an archipelago country composed of 17,000 islands and possessing a 250 million-strong population, the construction of the railway network will engender massive opportunities. For China and Japan, two countries with mature high-speed rail technology sectors, it may prove no less lucrative a proposition.

During President Widodo's visit in Beijing in March, he and President Xi attended a signing ceremony for the Memorandum of Understanding on the Cooperation on the Construction of the Jakarta-Bandung High Speed Railway. Less than a month later, during President Xi's visit in Indonesia, they both attended an "engagement ceremony" for the project marked by the signing of a framework agreement. Under this arrangement, Indonesia furnished China with a topographic map and seismic and geological data relating to the area between Jakarta and Bandung, and China in turn agreed to complete a feasibility study for the railway project by July 20.

Nevertheless, the feasibility study report does not guarantee China securing the bid. With Japan snapping at China's heels, it still remains for both China and Indonesia to decide where they stand on the project. As early as 2011, Japan's International Transportation Consultant Corp. had compiled a feasibility report. Japan has been lobbying Indonesia on the basis of its Shinkansen high-speed railway system. The system is believed to have sound safety and energy conservation features and earthquake-proofing highly suited to multi-island regions.

China's competitive advantages are no less prominent with the country's high-speed rail technology having proven that it can stand the test of various climates ranging from alpine to tropical conditions, in addition to various geological and geomorphic conditions. The length of high-speed railway in China totals 17,000 km, accounting for 55 percent of the world's total, and of that, the length that can accommodate vehicles traveling over 300 km per hour amounts to 9,600 km, accounting for a solid 60 percent of the world's total. Last year, the number of passengers traveling by high-speed rail reached 915 million, making up more than one half of the world's total.

On a surface level, China and Japan appear evenly matched, and Indonesia has been vacillating between the pair, seemingly undecided. Despite the fact that Jakarta has signaled that it hopes to sign an agreement with China in August, this does not constitute an automatic guarantee. Therefore, to secure a win, it now falls on China to come up with more bargaining chips in this, the crucial final stage of the bidding process.

A competitive edge?

Perhaps the cooperative proposals made by Xu will prove the tipping point. First, Xu pledged to enhance local procurement for the project, a move projected to create approximately 40,000 job opportunities for Indonesia each year from its inception onward. After the completion of the project, land surrounding the eight stations lying along the railway will be opened up for the building of hotels, apartments, and commercial complexes, forming a high-speed rail economic belt that will benefit local people.

Second, China proposes establishing a joint venture with Indonesia to operate the railway and share risks and proceeds, while providing training in high-speed rail construction, operation and management for Indonesian personnel. Third, China would help Indonesia to develop a committed high-speed rail industry and to establish factories to assemble the necessary equipment, as well as providing technical transfer. Fourth, China would help the country form a system of administrative standards to be employed in the building of the Jakarta-Bandung Railway. Fifth, China would aid Indonesia in exploring the third-party market, with a special eye to the Asian market.

The abovementioned proposals outline a clear and coherent model for Chinese high-speed rail cooperation with other countries. The model does not simply address the export of Chinese rail equipment but rather facilitates economic growth and employment as well as the industrial upgrading of importing countries. Moreover, the mode also offers those countries the additional benefit of jointly exploring the third-party market, providing even more development opportunities.

China has derived enormous social and economic benefits since its high-speed railway started to ship overseas on a large scale. Consequently, it is faced with competition from all corners. In addition to the run-of the-mill competitive tactics employed, which pertain to enterprises, products, technology, markets and investment, strategies used by other countries seeking influence within their own respective spheres have been of a decidedly political bent.

By playing the so-called "China threat" card, these countries have enacted more barriers for China's high-speed railway in going abroad. The loss of the contract for the Mexican high-speed rail project, and the challenge China faces from Japan in India and Thailand's high-speed railway projects all testify to the fact that the road of China's integration into the global economy will not necessarily always run smooth. Some Japanese media have even posited that Japan's price war strategies will result in a game where no one emerges the victor. International competition of this nature is definitely not purely commercial in either nature or motivation.

Indonesia is, after all, where President Xi first initiated the Belt and Road Initiative (comprising the Silk Road Economic Belt and the 21st-Century Maritime Silk Road), and the country represents an important springboard for the strategy. Indonesia is also the world's largest Muslim country, the largest economy in Southeast Asia and a member of the G20. Thus, from any perspective, it is common sense for China to attach more importance to the nation and increase its investment in it. Against such backdrop, Jakarta is also watching the game between China and Japan unfold, with an eye to elevating its own regional status and specific advantages.

Though not always pleasant, competition can serve to hone one's wits and abilities. From a macro perspective, the brand-new standards created through international bids for the Jakarta-Bandung Railway project have chartered China's diplomatic and cooperative concepts and outlook of wishing to maximize benefit for all parties concerned. It demonstrates that China's expansion into the overseas infrastructure construction market, galvanized by its hi-tech, wealth of experience and strong capital base, is distinct from the colonialism practiced by world powers of old. The Chinese approach is based on mutual benefit and creating common prosperity. Only by providing the countries with opportunities for development can the Chinese high-speed rail industry blaze a trail across continents and secure itself a lasting future.

The author is an op-ed contributor to Beijing Review

Copyedited by Eric Daly

Comments to liuyunyun@bjreview.com

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