Friday, December 3, 2010

GE to help build Chinese trains for California?

China’s CSR, GE May Bid on California, Florida High-Speed Rail

Dec. 3 (Bloomberg) -- CSR Corp., China’s largest maker of rail vehicles, and partner General Electric Co. may bid to build high-speed train lines in California and Florida as U.S. President Barack Obama spurs investment in railways.

The companies may also compete for a project on the east coast, CSR Chairman Zhao Xiaogang told reporters in Hong Kong today. They are yet to finalize what form their cooperation will take and will decide which of the lines to bid on over the next three years, he said.

The GE-CSR venture may face competition from trainmakers including Bombardier Inc., Alstom SA and East Japan Railway Co. as the U.S. federal government promotes rail to ease congestion and curb pollution. China has also said it may offer financing for a planned California high-speed line costing at least $40 billion to help local trainmakers break into the U.S. market.

“Bidding for such projects can help give CSR an international profile and boost its image as a global company,” said Stanley Yan, a Shanghai-based analyst at Masterlink Securities Corp. “The company is seeking new markets.”

CSR, based in Beijing, wants overseas sales to account for 20 percent of total revenue by 2015 from about 8 percent now, Shao Renqiang, the company’s secretary, told reporters. It expects total sales to climb to 150 billion yuan ($23 billion) by that year, he said.

“Overseas contracts are lucrative and we want to expand such sales,” Zhao said. “We’re actively seeking sales in the U.S., where there are seven or eight contracts in the pipeline.”

China Railways

The company is also bidding for projects in China, where the nation plans to more than double its high-speed passenger network to about 16,000 kilometer by 2020, Zhao said. China is accelerating the pace of construction to cut travel times and ease transportation bottlenecks, he said.

CSR rose 1.9 percent to HK$9.35 at the close of trading in Hong Kong. The stock has risen 64 percent this year, compared with a 6.6 percent gain in the benchmark Hang Seng Index.

CSR and GE, based in Fairfield, Connecticut, are also building a diesel-engine train factory in Changzhou, China. The two last month agreed to form a venture that will make parts for diesel trains.

GE, the world’s biggest maker of diesel trains, agreed to cooperate with China on high-speed rail as it doesn’t have its own technology. The partnership may eventually support about 3,500 jobs in U.S., with final assembly taking place in the county, GE said last year.

California Network

California, the most populous U.S. state, is planning to build a high-speed rail network that will eventually run from Sacramento and San Francisco to Los Angeles and San Diego.

China can offer a “complete package” for the project including financing, He Huawu, chief engineer of the nation’s rail ministry, said in a September interview. The same month, California Governor Arnold Schwarzenegger rode bullet trains in China, Japan and South Korea as he sought contractors and financing for the project.

The California line won $2.3 billion in federal funding in January, as part of an $8 billion stimulus package announced by President Barack Obama. The government awarded a further $2.4 billion of aid for high-speed projects nationwide in October.

One thing that absolutely has to be mandated as part of this deal if we were to take up China's bid would be a technology transfer, restoring the ability of American companies to design and produce state of the art passenger trains. That same requirement, after all, is how China got the technology in the first place and how South Korea has gotten it as well. Of course, our bargaining position is better the more domestic funding we have and the less we have to rely on the loans offered by various foreign nations such as China.

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