A planned merger between China’s two leading train makers spells gloom for their European competitors. CNR and CSR, China’s two train makers, which are respectively the world’s largest and second-largest train makers, recently announced plans to merge in a move that will make them a powerhouse in the high-speed rail industry. No further details have been revealed, but initial estimates indicate that the merger will boost the two companies’ profits by 14 percent, thanks not least to lower research and development costs as well as a less cut-throat price war.
China is also willing to finance 85 percent of international high project with the Import Export Bank of China.
Beijing’s willingness to come up with an enticing credit proposal for the financing model when it sells Chinese high-speed trains abroad goes down especially well with emerging economies.
HSR construction costs in China tend to be lower than in other countries. Based on experience with World Bank supported projects, the cost of railway construction is about 82 percent of the total project costs mentioned earlier. China HSR with a maximum speed of 350 km/h has a typical infrastructure unit cost of about US$ 17-21 million. (RMB 100-125m) per km, with a high ratio of viaducts and tunnels. The cost of HSR construction in Europe, having design speed of 300 km/h or above is estimated to be of the order of US$25-39 m per km. HSR construction cost (excluding land, rolling stock and interest during construction) is estimated to be as high as US$ 52m per km in California. Based on D.P. Crozet, the unit cost for four HSR lines under construction in France in 2013 ranges between US$ 24.8m and 35.2m.
Other factors include a relatively low cost of land acquisition and resettlement, localization of the design and manufacture of goods and components as well as the standardization of designs for embankments, track, viaducts, electrification, signaling and communication systems. For example, the slab track manufacture process was imported from Germany but the cost of the Chinese made product is about a third lower than the German product as a result of large volumes and a lower labor cost. The technology developed for construction of tunnels not only resulted in a low unit cost but also a speed of 5-10 m of tunnel construction per day. The HSR tunnel construction cost in China (about US$ 10-15 million per km) is a fraction of that in other countries. Tunnel costs are heavily influenced by geology and labor costs and, in the case of China, the latter has also helped in cost reduction.
China Railway has accomplished a remarkable feat in building over 10,000 km of HSR network in a period of six to seven years at a unit cost that is lower than the cost of similar projects in other countries. The HSR network operates with high traffic volumes on its core corridors, and with good reliability. This has been accomplished at a cost which is at most two-thirds of that in the rest of the world. Besides the lower cost of labor in China, one possible reason for this is the large scale of the HSR network planned in China. This has allowed the standardization of the design of various construction elements, the development of innovative and competitive capacity for manufacture of equipment and construction and the amortization of the capital cost of construction equipment over a number of projects.
China high-speed rail system will expand to 19,000 kilometers (11,800 miles) by 2015. It is already transporting some 2 million passengers a day on trains that are rarely delayed, and which go nearly 200 miles an hour, twice as many passengers as domestic airlines.