Subject: China
From: <[email-masked]>
To: <[email-masked]>, <[email-masked]>
Cc: <[email-masked]>
Date: Fri, 23 Apr 2010 14:53:11 +0800

Gentlemen,

We discussed a little bit railway business during your last trip to China.
I'm sending you some articles from FT related to the
ambition/practice/business expansion  of Chinese government/rail enterprises
into the overseas markets.  Hope you find them interesting.

Thanks and regards,

Michael

CHINA GETS UP SPEED IN RAILWAY PROJECTS

By Jamil Anderlini in Beijing
2010-03-17<http://www.ftchinese.com/archiver/2010-03-17>

For decades the high-speed railway sector has been dominated by a handful of
companies in Europe, Japan and North America that have mostly focused on
their own regional markets.

But now, just as the industry witnesses a proliferation of high-speed rail
projects across the globe, the rapid rise of Chinese state-owned rail
producers is posing a serious threat to the dominance of companies such as
Germany's Siemens, France's Alstom, Canada's Bombardier and Japan's
Kawasaki.

“Chinese companies are changing the landscape of the global railway market
because of the dimensions of their home market and because they are becoming
involved in international tenders, which is new,” says Dominique Pouliquen,
Asia-Pacific managing director for Alstom.

While Chinese companies are new to the global stage and lag their European
rivals in terms of quality and technology, they have some significant
advantages.

*“Price is their number one competitive advantage and they are very well
organised, with financing support from Chinese state-owned banks,*” Mr
Pouliquen says.

*“They offer a global package which is usually combining technical solutions
with financing so it is very easy for governments to make a decision to use
their products.*” The Chinese Ministry of Railways, which directly owns many
of the country's rail companies, co-ordinates tenders so they do not bid
against each other. It also encourages foreign companies to join Chinese
consortiums by holding out the prospect of greater access to the enormous
Chinese market.

Analysts say Chinese companies are already very active in bidding for
projects in the Middle East and Latin America. *They are also targeting
projects in *Australia and* the US *and have already made significant
inroads in their own region, with contracts in Thailand and Hong Kong.

The rise of a Chinese rail industry with global aspirations has happened
virtually overnight. Iain Carmichael, managing director of consultants
Lloyd's Register Rail (Asia), says that as recently as three years ago
Chinese companies did not have the know-how for many parts of their own rail
systems, such as signalling and high-speed technology.

“But as the Chinese gained the know-how, the relationship changed, so now
the Chinese have the upper hand and the Europeans have to work
co-operatively if they want to compete.”

The main constraint on Chinese exports of rolling stock is capacity, as
Chinese producers try to keep up with orders at home in what is now the
largest market in the world.

“Some big manufacturers are tripling their output this year and we're seeing
a vast expansion of metro systems as well as high speed rail,” Mr Carmichael
says.

China's market for rail equipment, including trains, components and
equipment such as signalling systems, is expected to quintuple from an
average of $10bn a year between 2004 and 2008 to more than $50bn between
2009 and 2013, according to McKinsey.

This year, China is expected to account for more than half of the total
global expenditure on rail equipment.

The government plans to build at least 30,000km of new railway, most of it
high speed, over the next five years and China is expected soon to overtake
Russia to have the second-largest rail infrastructure in the world after the
US.

Expansion has been accelerated following the financial crisis to help boost
growth. Target dates for completion of many projects are up from 2020 to
2015.

The size and scale of the Chinese market partly explains why European and
international rail equipment providers are scrambling to partner Chinese
state producers inside the country and around the world.

But co-operation has come at a price.

“European manufacturers have complained that they have transferred
technology to China as required [by Beijing] and now the Chinese are using
their technology to compete on price in the international market and even in
the European home markets,” says Evan Auyang, an executive at Hong
Kong-based Transport International.

China on track to join the ranks of train manufacturers

By Robert Wright in London
2010-03-02<http://www.ftchinese.com/archiver/2010-03-02>

China is likely to become a worldwide exporter of high-speed trains to
compete with the market's established European suppliers, a senior executive
of one of the sector's leading companies has predicted.

Edzard Lübben, vice-president for high-speed rail of the transport arm of
Germany's Siemens, nevertheless insisted he was “very comfortable” with
China's system of requiring foreign suppliers to transfer technology to
Chinese partners.

He was sceptical, meanwhile, about the potential of European rail
liberalisation to produce the once-expected surge of orders there. Mr Lübben
was speaking against the backdrop of expected rapid growth in the world
market for passenger trains capable of 220km/h or more. The Asian market is
expected to expand 9.3 per cent a year until 2016, according to research
commissioned by Unife, the European railway industry association. Much of
the growth is set to be in China, which is building 7,000km of dedicated,
high-speed rail routes.

Trains in service in China are all based on imported French, German or
Japanese technology. The domestically designed and manufactured China Star
has been sitting for years in a railway depot after disappointing test runs.

Philippe Mellier, chief executive of France's Alstom Transport, caused a
furore in China in January last year after he told the FT China's market was
becoming less open and European countries should shut their markets to
Chinese-built trains in return.

Mr Lübben, in contrast, said it was “understandable” China was reluctant to
rely on entirely foreign-built trains. Some of the high-speed trains in
China are based on Siemens' Velaro design, developed from Germany's ICE3
train.

“We feel very comfortable to work together with Chinese partners,” Mr Lübben
said. “We did some projects with transfer of technology involved. But . . .
we have over 30,000 people working with us there. We might have some better
opportunities than other companies.”

China's domestic rail supply industry was developing fast, Mr Lübben went
on. “It might very well be that they are developing some of their own
products that could be a competition in China and could be a long-term
competition worldwide,” he said. But Mr Lübben welcomed the competition.
“The better one will win,” he said.

A Chinese manufacturer – likely to come from amid the state railway
workshops that currently supply most domestic demand – would join a market
rapidly widening beyond Siemens and Alstom, the two traditional competitors
for most international orders. In September, Bombardier, the world's largest
trainmaker, won an order for the first time to supply its Zefiro high-speed
train design to China with a Chinese partner. Japan's JR Central is also
mounting a push to export its Shinkansen system, while Italy's Ansaldo Breda
has also exported its ETR500 train for the first time, to Turkey.

Mr Lübben insisted Siemens would continue to compete strongly in a more
crowded marketplace. “Siemens has five or six projects where we proved that
we can adapt our high-speed trains to meet specific local requirements and
very successfully operate from day one a very reliable train with great
comfort,” he said. “That's what we're going to play on.”

However, few orders would come from new, private European operators in the
immediate future, he predicted. International passenger traffic and some
domestic routes are now open to competitors to state-owned incumbents. But
only one new entrant – Italy's NTV – has so far ordered trains

“For now, I'm not seeing them [entering the market] within the next six to
12 months,” said Mr Lübben.

China's rail wizards have the answer

By Tyler Brûlé 2010-04-22 <http://www.ftchinese.com/archiver/2010-04-22>

When China's rail authorities recently announced plans to build a high-speed
rail link connecting Beijing with London I had to pause and wonder who would
be booking passage on this Eurasian super express?

Would it be a shuttle for Chinese seamstresses heading off to work in
Italian sweatshops? Perhaps it might position itself as a pimped up version
of the Orient Express catering to Japan's ever-greying tourism market? Or
maybe it would turn a profit by selling seats exclusively to train-spotters.

Having spent the better part of the past weekend in Hong Kong trying to
figure out how I am going to get 12 colleagues back to London, I reckon the
rail wizards in the People's Republic are on to a winner if they can
persuade other nations along the proposed line to play ball and they make
the journey comfortable enough.

Rather than dreaming up elaborate routings (Hong-Kong-Auckland-Santiago-São
Paulo-London was one option on the table), checking the price of chartering
a jet fit for 12 or trying to predict the direction the winds might blow in,
it would have been easier to get everyone to a rail platform in Beijing,
pack some lunchboxes and send them on their way. Goodness knows, they all
would have been back at their desks by now.

Aside from revealing the glaringly obvious – that the world cannot function
on fibre-optic cables, huge servers and social network sites alone, and is
rather helpless when there is not a fully fuelled Airbus or Boeing close at
hand – it also demonstrated that for myriad reasons there is an urgent need
to invest in alternative global transport links for days/weeks/months when
volcanic ash, cyber-terrorism and other calamities can bring commerce and
continents to a standstill.

On a more practical front, all those companies that decided to close their
company travel office a few years ago and are now worried that their foot
soldiers might be basking under the blue skies of Bali might want to think
about either bringing back a group travel desk or retaining a top-notch
travel agency to deal with a logistical headache as big this one.

I might have the odd issue with some of Beijing's behaviour, but if China
wants to build a high-speed rail link that could whisk thousands of people
back and forth across the frontier-lands of Europe and Asia every day then I
will be the first to buy a rail-pass.

Indeed, there is something quite romantic about a 21st-century whistle stop
business trip calling at Vienna, Kiev, Almaty, Urumqi and Beijing rather
than making countless, stressful point-to-point journeys over the course of
the year.

Other countries with a vested interest in the rail sector (Canada, Germany,
France and Japan) might want to think about filling in other gaps around the
globe. Cape Town to Copenhagen and Buenos Aires to Montreal are also up for
grabs.

Siemens boards Chinese rail bid

By Jamil Anderlini in Beijing
2010-03-17<http://www.ftchinese.com/archiver/2010-03-17>

Siemens has dropped a bid to supply trains and equipment for the $7bn
Mecca-to-Medina high-speed railway line project in Saudi Arabia, opting to
join a Chinese consortium bidding for the work.

In a sign of the growing global competitiveness of Chinese rail
manufacturers, Siemens abandoned its own bid as part of a consortium with
the Saudi Binladin Group.

Instead, it has joined a bid led by state-owned China South Locomotive &
Rolling Stock Corporation for the second phase of the Haramain high-speed
rail project, according to people familiar with the situation.

Siemens will provide signalling and electrification equipment to the Chinese
consortium, which also includes China Railway Construction Corp and the
Beijing Railway Administration.

The 450km railway will link Islam's two holiest sites via the port of Jeddah
and will ease congestion during the annual Hajj pilgrimage, when more than
2.5m people make the journey to Mecca.

The Chinese bid is seen as the frontrunner – China Railway Construction
Corp, which is also state-owned, was part of a consortium that won a $1.8bn
contract to build the first phase of the project last year.

“Siemens realised when China threw its hat in the ring, that they were
unlikely to win so they decided to join them rather than let one of their
competitors team up with the Chinese bidder,” said one person involved in
the project.

France's Alstom and South Korea's Hyundai and Samsung are also bidding for
the second phase of Haramain, according to a person close to the situation.
Siemens said it was unable to comment on the project because of the ongoing
tender.

Final bids for the project are due in on May 1.

-- 
Michael Lin
Co-founder & CEO
Thornton Group LLC
Room 705, SK Tower, No. 6 Jia,
JianGuoMenWai Avenue,
ChaoYang District, Beijing 100022
Tel: +86 10 6563 0288
Fax: +86 10 6563 0519
Email: [email-masked]
Website: www.thorntonai.co