China Rail Expansion for its own Economy Push, Biz for Chinese Policy Banks/SOEs/Private Sector Cos & employment

Dangerous cocktail of mixing politics with economics, patent infringement and copy-cat imitation. Is it Chinese style of encirclement? While that is open to speculation, part of the reason why China is pushing its railway footprint is for its own economic needs. To boost employment and give the economy a stimulus, China plans to spend $504 billion (2016-2020) to expand the high-speed railway network to 30,000 km (some say, by 40,000 km). As China scholar Dragan Pavlicevic says, “China’s railways create opportunities for Chinese policy banks, state owned enterprises (SOEs) and private sector companies.”

That iconic classic The Little Engine That Could (apparently one of former US president Obama’s favourite) was the story of the brave engine that dreamt big, and scaled heights, motivated not by profit but by something higher—inspired generations across race, cultures and colour. It seems China has taken the story literally, as it’s engines relentlessly scale parts of the world, Africa to the Russian backyard, Europe to the Indian frontier. Why are China’s engines (an estimated 350 international railway projects in 2014) making us uneasy, instead of holding us spellbound?

In recent weeks, China’s claims on Doklam—the frontier region where China, Bhutan and India meet, by way of construction activities (road building) and through disputed Kashmir has been one thing. Clearly, China’s breakneck railway expansion is another.

China has been public about its railway expansion plans, following the grand unveiling of the Qinghai-Tibet railway in 2006. China’s whopping $ 3.16 billion Qinghai-Tibet railway, one of the longest railways at 1,142 km cutting across ecologically fragile flashpoints such as KeKe Xili (also known as Hoh Xil) nature reserve, an alpine plateau home to the endangered Tibetan antelope was nothing short of an extraordinary engineering feat. The railway linking Golmud city (in Qinghai province) to Lhasa (the capital of Tibetan Autonomous Region, TAR) with some sections traversing elevations above 5,000 metres paved the way for China’s railway bug.

A further extension of the line from Lhasa to Shigatse commenced (the second biggest city in TAR and home of the Tashilhunpo monastery, the seat of power of the Panchen Lamas) covering 540 km with 96 tunnels, scaling elevations ranging between 3,600 m to 4,000 m, with some portions along the Lhasa (river) and Brahmaputra (river) and was completed in 2014.

Indians may recollect that British missions to Tibet in the 18th and 19th century such as Bogle (1774), Turner (1783), Bose (1815) which paved the way for Francis Younghusband’s expedition to Tibet (1904), culminated at Shigatse.

China’s hasn’t stopped extending that line. An extension from Shigatse will connect to Gyirong, Nepal and is expected to be complete three years from now, in 2020. By 2022, the line (if geographical obstacles be tamed) will extend to Kathmandu. China’s state-backed media says this exercise is at Nepal’s behest calling it Nepal’s ‘Big Railway Dream’ and ‘at Nepal’s request’.

Is it Chinese encirclement? While that is open to speculation, part of the reason why China is pushing its railway footprint is its own economic needs. To boost employment and give the economy a stimulus, China plans to spend $504 billion (2016-2020) to expand the high-speed railway network to 30,000 km (some say, by 40,000 km). As China scholar Dragan Pavlicevic says, “China’s railways create oportunities for Chinese policy banks, state owned enterprises (SOEs) and private sector companies.”

China boasts of the world’s two largest train makers—China South Locomotive and Rolling Stock Corporation Limited (CSR) and China CNR Corporation Limited. The two merged in 2015 to form a new entity, CRRC or China Railway Rolling Stock Corp, with a ‘budget more than that of its five international competitors combined (Bombardier of Canada, Alstom of France, Siemens of Germany, Kawasaki Industries of Japan and General Electric of the United States).’ In fact, the CRRC’s $63 million joint venture plant to manufacture railway engines was the first of the foreign companies to come to India under Make-in-India and is based in Gurgaon.

Thanks to the financial backing, CRRC has now unveiled new trains called ‘Rejuvenation’ (replacing the earlier ‘Harmony’ trains), which reach speeds up to 400 km/hr (beating the Japanese Nozomi bullet trains which reach up to 285 km/hr). These are the ‘generation-next’ Chinese imports (after Chinese toys, cheap clothes, plastic bags and what-have-you).

But it is neither China’s well-earned opportunities nor happy mergers, neither its well-deserved engineering feats nor China superseding Japanese prowess that makes us uneasy. It is what underlies it.

While the Tibetans in exile (in India) and any environmentalist worth her salt can easily give us the lowdown on the expansion of China’s railway network in the heart of the Tibetan plateau, it is the Chinese assumption, ‘might is right’ that is deeply rankling.

The Japanese may well have a different dimension to the story. The Japanese who have been amongst the leading pioneers of the bullet train (shinkansen) have accused China of intellectual property right infringement. According to a trio of scholars associated with the National University of Singapore (NUS), Yang Mu et al (2015), Japan’s Kawasaki Heavy Industries (KHI) claims that China has been a copy-cat, with its CRH380A high-speed train being a copy of a Japanese product. The scholars also indicate that China lags behind when it comes to energy consumption and signal controlling system. This should strike a note of caution, given China’s interest in the 2,200-km Chennai-Delhi line and 1,200-km Delhi-Mumbai line. Laos and Thailand may offer yet other dimensions of what China’s railway plans portend. China plans to establish a pan-Asian Railway Network (PARN), which aims to connect (South) China with Singapore. The first keel is its $5.8 billion, 414 km long China-Laos railway which will pass through 75 tunnels and connect Vientiane with Mohan-Boten border.

A large part (70%) of the investment comes from China, which prefers a ‘loan and build’ model. But the finer details such as interest rate and loan repayment may push Laos into debt. Asia Sentinel notes that the International Monetary Fund had warned (in 2013) that ‘ the external debt would rise above 125% in a year and remain over 100% for a decade’ given that profitability and viability are unpredictable.

As for Thailand, the China-backed $5.2-billion, first-phase 800-km line linking Thai-Laos border of Nong Khai with Bangkok and the eastern deep port of Mapta-phut in Rayong is causing a mild storm. Financial Times (2016) noted that critics say that such projects attribute a win-win to China, which allows it to “mop up spare supply chain capacity that lacks enough orders domestically”.

This brings us to China’s train to Nepal and the road construction activities at the Indian frontier. There is no doubt that China is economically miles ahead of India. Nor are there any doubts about China being Asia’s rising sun. Nor are doubts that China cracking India’s market could be a big boon and ‘win-win’ for China—but the bottom-line is that India’s needs and China’s overcapacity are complementary.

But a dangerous cocktail of mixing politics with economics, patent infringement and copy-cat imitation suits neither established powers nor rising ones. In that sense, China is rising, but unlike America, a magnanimous power, China has yet to fine-tune its rise—which means that scribes at Global Times must get a mouthwash, and China’s diplomacy towards India, a hard polish. It is China that has the potential to hold us spellbound as that ‘little engine that could’—not by might nor by ‘transactional diplomacy’ (which perceives how much ‘win-win’)—but as a responsible stakeholder that respects the neighbourhood without stepping on toes in South Asia and in the South China Sea. Whether China chooses this over being the ‘bull in the China-shop’ is clearly its own calling.

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