Chinese High Speed Rail Cos look to Projects in US, Russia

Beijing: China has set its sights on high speed rail construction projects in the United States and Russia after Mexico decided to postpone a high speed rail investment project indefinitely, according to the China Business News.

On Nov. 3, transportation authorities in Mexico announced that a consortium organized by China Railway Construction and CSR, two of China’s major railway developers, and four Mexican partners won a bid to build a high speed rail between Mexico City and Queretaro. The total value of the project was expected to hit 27 billion yuan (US$4.3 billion).

The Mexican government, however, announced Nov. 6 that it had cancelled the previous bidding results and would launch a new bidding process Jan. 14. As a result, the consortium took part in the bidding again.

To the surprise of the market, the Mexican government announced Jan. 31 that it was postponing the project indefinitely.

The decision caused A-shares of railway stocks in China to fall sharply on Feb. 2, the first trading session of the month. Shares of CSR even tumbled 9.9%.

China Railway Construction Company secretary Yu Xinxi told the China Business News that the company has been in talks with the Mexican authorities for compensation but both sides need some time to finalize the amount.

Yu said the Mexican project is not expected to impose and adverse impact on China Railway Construction’s bottom line, as it had signed new contacts valued at 564.92 billion yuan (US$90.4 billion) with domestic and foreign customers in the first three quarters of last year.

The China Business News said it was not the first time Chinese enterprises have hit snags in their overseas high speed rail investment projects. In 2005, Chinese firms signed an agreement to build a 158 kilometer high speed railway in Turkey, but Chinese investors faced problems as the country changed the design many times during the 2005-2014 period before the construction was completed.

Sources from a Chinese railway developer said in the China Business News that these problems did not deter his company from seeking opportunities overseas because investment returns in the foreign markets tend to outpace returns in the China market, which is expected to contribute more to the firm’s bottom line.

China Railway, another Chinese railway developer, has been gearing up to win bids for projects in the US and Russia, including a plan to build a high speed railway in California and a line between Moscow and Kazan, the report said.

In Asia, China Railway has also been eyeing a project to build a high speed railway between Kuala Lumpur in Malaysia and Singapore, according to the report.

China Railway has already signed agreements to build a high speed rail to link Hungary to Serbia and another to connect China and Thailand. In addition, the company has proposed building a high speed railway to link China and Europe.