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China playing key role in building rail links across region to help realize Belt and Road’s plan for greater connectivity

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October 2-8, 2017
By ALFRED ROMANN
and DAVID HO in Hong Kong
For China Daily Asia Weekly

Using Chinese funding and know-how, Thailand is set to start building a key stretch of railway that will eventually link Bangkok to Kunming in Southwest China’s Yunnan province. This rail line will go through Laos and may eventually connect with Kuala Lumpur, in Malaysia.

China’s push to build more trade infrastructure is helping to rapidly step up railway connectivity in Asia and around the world.

“The Silk Road Economic Belt and the 21st Century Maritime Silk Road essentially integrate Asia, Europe and Africa,” explained Gan Chong Chieh, head of the China desk at law firm MahWengKwai and Associates.

“This (Belt and Road) Initiative will also see Chinese corporations building roads, railway lines and ports needed in many parts of Asia, Africa and the Middle East, which in the long run increases connectivity within countries.”

China’s advances in railway technology, which Premier Li Keqiang once called the country’s “golden business card”, might just bridge the gap between demand and supply of transport infrastructure in the region.

China’s high-speed trains have been sold to 102 countries and regions. $18 billion worth of high-speed rail related agreements were signed last year alone, up 40 percent from a year earlier.

A big part of this push to build more state-of-the-art rail infrastructure is the result of the ambitious Belt and Road Initiative. One of the ways China is driving an upgrade of that sprawling trade route is by investing in big rail projects or working in their development by providing financing and expertise, or by doing both.

“Railways have the power to change the landscape of connection in Asia Pacific and beyond,” said Pierre Chartier, chief of the transport infrastructure section at the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP).

Chartier believes a “one for all, all for one” approach is needed to develop the railway system across the region.

Supee Teravaninthorn, the director general of investment operations at the Asian Infrastructure Investment Bank (AIIB), agrees, adding that more infrastructure and better connectivity are needed to support ongoing growth in the region.

“There’s still a big gap between the demand and supply of transport infrastructure in the region, especially as it becomes increasingly globalized,” she said.

China’s advances in railway technology, which Premier Li Keqiang once called the country’s “golden business card”, might just bridge that gap.

China’s high-speed trains were launched a decade ago during the administration of then president Hu Jintao. Those trains were named Hexie or “harmony”. The newest trains on China’s fastest routes have been christened Fuxing, which translates as “rejuvenation”. They are capable of traveling at up to 400 kilometers per hour.

Indonesian President Joko Widodo (left) attending the groundbreaking ceremony of the country’s first high-speed railway on Jan 21 last year. The 142-km railway will be built by a Chinese-invested consortium. Credit: Agus Suparto / Presidential Palace / AFP

One of the more notable Belt and Road-related transport projects is the Pan Asia Railway Network that will eventually connect Kunming to Singapore. Sections of the 3,900-km line are in various stages of development.

Construction began in late 2016 on the $5.8 billion China-Laos line stretching 418 km. The trains, through 75 tunnels and 167 bridges, will be able to hit a maximum speed of 200 km/h.

In Thailand, construction of the first phase of a 253-km, $5.5 billion high-speed rail project that will link Bangkok to Nakhon Ratchasima province — part of a railway link with Laos and China — should start by November after completion of environmental impact assessments. The project will require another 355-km link with Nong Khai on the border with Laos.

Slated for completion by 2022, the railway is expected to link Thailand to China through landlocked Laos. In July, Thai Prime Minister Prayuth Chan-ocha signed an executive order to get the project moving.

When all the various phases are complete, the trip from Bangkok to Vientiane, the capital of Laos, should take just four hours. It will also be possible to travel by rail from Bangkok to Kunming.

The grander plan is for the rail link to be eventually extended down south to Kuala Lumpur and Singapore.

Some projects have faced hurdles, such as the China and Myanmar line, stalled since 2014, that aims to link Kunming and the Myanmar seaport of Kyaukpyu. A proposed project between Kunming and Yangon is also held up.

Overall, however, China is driving the construction of huge rail infrastructure throughout the region.

“An example would be the East Coast Rail Link project in Malaysia, which will be built by China Communications Construction Company and is partially funded by the State-owned Export-Import Bank of China,” said Gan at MahWengKwai and Associates.

“It will link the east coast of Malaysia to Port Klang, which is located on the Straits of Malacca, a major maritime route and hotspot for economic trade.”

And there are other projects in the works throughout the region. When Chinese Premier Li Keqiang and Singapore’s Prime Minister Lee Hsien Loong met in July during the G20 Summit in Hamburg, Germany, one of the many topics discussed was the Kuala Lumpur-Singapore High Speed Rail project.

Indonesia, for its part, is building its first high-speed railway across a 142-km stretch between Jakarta and Bandung. It will be built by a Chinese-invested consortium.

In May, a group of companies from Indonesia and China signed a $4.5 billion loan with the China Development Bank, which will cover most of the project cost. In July, Indonesia’s State-Owned Enterprises Minister Rini Soemarno took part in a groundbreaking ceremony for the high-speed rail link’s Walini tunnel.

UNESCAP’S Chartier said the Belt and Road Initiative provides a shared vision of development that ties projects together.

“The Belt and Road allows countries to align national initiatives with wider regional ones,” he said. “It also allows better synchronization and rationalization of investments.

“Besides its railway expertise, China is also offering a source of funding through multilateral institutions, such as the Asian Infrastructure Investment Bank, to smaller countries which might not have the capital or capacity to contemplate such projects on their own.”

“In the long run, funding is less important than sustainability for any infrastructure project,” said Teravaninthorn at the AIIB.

Ben Simpfendorfer, managing director of consultancy firm Silk Road Associates, said China has “a major role to play upgrading the region’s rail networks”. But he said high-speed rail may not be the only option.

“Belt and Road countries can equally benefit from the upgrading of existing lines, such as through double-tracking or electrification. Thailand’s plans for double-tracking and track strengthening are a great example of this and a real opportunity for China.”

Teravaninthorn, at the AIIB, emphasized the importance of operations and maintenance planning, beyond building the infrastructure.

“In the long run, funding is less important than sustainability for any infrastructure project. Efficient and effective operations management is essential in ensuring that an infrastructure project is bankable to investors,” she said.

“In certain countries, railways are run at a loss and only survive thanks to government subsidies. Not every country can afford that burden.”

Belt and Road countries that invest in rail connectivity would also be wise to look at other areas such as power generation, said Simpfendorfer.

“Roads and bridges are also important, especially where they connect industrial parks to sea and airports,” he added.

Still, more rail connectivity should drive trade and economic growth. Malaysia’s new rail link is a case in point.

“With easier, faster and cheaper logistics, countries like Malaysia will see an increase in cross-border trade and investment,” said Gan.

He said the economic growth that Malaysia gains from this cooperation is likely to be steady “since the Belt and Road Initiative focuses on sustainable development”.

“The potential is truly limitless.”

Riding the rail revival Bold investment by China in high-speed train services is helping to unlock the country’s vast economic and social potential

October 2-8, 2017
By DAVID HO
and ALFRED ROMANN in Hong Kong
For China Daily Asia Weekly

In just a decade, China rolled out its first high-speed train service and then built the longest and busiest high-speed railway network in the world.

China last year had 22,000 km of high-speed rail, more than 65 percent of the global total, and it looks to add another 16,000 km by 2025.

Under the current Five-Year Plan, China is spending 3.5 trillion yuan ($531 billion) on railway construction, with more than 80 percent of its major cities connected by high-speed rail by 2020. By 2030, the network aims to link all cities with populations of more than 500,000.

“China is one of the countries that endorse the United Nations 2030 Agenda for Sustainable Development. The goals include aligning economic growth with social inclusiveness and environmental sustainability. Railways are the perfect way to achieve that,” said Pierre Chartier, chief of the transport infrastructure section at the United Nations Economic and Social Commission for Asia and the Pacific.

“There’s been a bit of rail revival around the world and here’s why. Transport makes up for over a quarter of global energy consumption. Railways make up only 2.2 percent of that number, compared to aviation that consists of 10.4 percent or road transport that is 73.8 percent,” he explained.

Also, transportation makes up over one-fourth of the world’s carbon-dioxide emissions, he said. “Railways stand for just 3.3 percent of the number, while it’s 10.6 percent and 72.6 for aviation and road transportation, respectively.”

Affordability, the lack of delays often associated with conventional trains, and less dependency on weather or traffic conditions, have all made modern railways popular.

The numbers favor railways, especially as China works to cut costs and pollution.

Hostesses welcome passengers before a Fuxing high-speed bullet train leaves Beijing for Shanghai on Sept 21. China plans to link more than 80 percent of its major cities by high-speed rail by 2020. Credit: Song Fan / ImagineChina

The sheer number of railway projects, both in and outside China, translates into significant economic impact. When China first started expanding its rail network, there were concerns that the country was stretching itself thin, fiscally. The Ministry of Railway’s revenues in 2010 were 686 billion yuan, while debts totaled 1.98 trillion.

But all the investment appears to be paying off, according to Eda Erbeyli, a project manager for research firm Daxue Consulting.

“Based on our research, the profits have been increasing steadily in the last few years. In 2014 it was 636 million yuan and grew to 680 million the following year. Their railway asset value also saw a huge increase, going from 5.6 trillion yuan in 2014 to 6.2 trillion in 2015.

“China’s total asset value for railways was 7.2 trillion yuan as of last year. Their total revenue for 2016 was 900 billion yuan, with a total profit of 1 billion yuan,” she said.

All this infrastructure and connectivity creates significant economic dividends. Rail lines bring life, sprout satellite towns and generate traffic to rural areas.

“Transport is considered crucial to the development of China as it directs development wherever it goes since connection drives business,” said Erbeyli.

“An example would be Chengdu (capital of Southwest China’s Sichuan province) which is now considered a transport hub. The railways can serve as an economic lifeline to the more rural parts of the country.”

Chinese railway projects also have lower costs. “The main reason for this is that their railways are mainly built on viaducts. This gives them savings of up to 85 percent on the cost,” Erbeyli said.

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Railways can also boost existing businesses and new industries. Chartier from the UN pointed to estimations from the Malaysian government that a railway line linking Singapore to Kuala Lumpur will bring about 80 projects in six major industry groups along the corridor and create 67,000 jobs for 10 years after the line comes into operation in 2026.

And there is also a psychological shift. “Railways increase trade, not just at the beginning and end of the line, but also create economic clusters along it. That can change the socioeconomic mentality and the landscape of the people,” Chartier said.

The upshot is the potential for much greater domestic tourism spending and a boost to industries tied to it.

There has been a learning curve associated with the development of China’s high-speed railway network.

In July 2011, in Wenzhou in East China’s Zhejiang province, a Beijing-Fuzhou train crashed into a stationary train, causing 40 deaths and more than 200 injuries. In August 2011, Beijing temporarily put a halt on new projects.

“The security of passengers is of course paramount to any transport service. Big projects like these high-speed railways usually face some teething problems in the early stages,” Erbeyli from Daxue said.

The debut of the new Fuxing, or “rejuvenation”, bullet trains this year has generated a lot of positive attention, with China now embarking on a monumental project to build a new railway line in the southwest between Chengdu, in Sichuan, and Lhasa in the Tibet autonomous region.

China Railway Eryuan Engineering Group is tasked with designing the line, which will pass through 21 snowcapped mountains and cross 14 major rivers.

The 1,700-km Sichuan-Tibet Railway will cost a hefty 250 billion yuan, but it will cut a 48-hour journey down to just 13 hours. It is set to be a major construction achievement and will open a vital economic door for Tibet.

On Aug 8, construction officially began on a Dunhua-Baihe high-speed line in the northeastern province of Jilin. The 113.5-km, 250 km/h line will provide the Yanbian Korean autonomous prefecture with direct access to Changchun, Jilin’s capital.

Chartier at the UN believes China’s advances in rail put it on track to tap the country’s potential.

Also under development is the world’s deepest and largest underground high-speed railway station — at the Great Wall of China. Located at the tourist attraction’s most popularly visited section, Badaling station will be 102 meters below ground.

The underground station will form part of a 174-km high-speed railway line linking Beijing with the city of Zhangjiakou in North China’s Hebei province.

According to Erbeyli, these impressive achievements will elevate and strengthen the credibility of China’s railway technology and construction services in the eyes of potential customers in other countries.

“This helps build trust and confidence in those from other markets,” she said. “But just as importantly, it also helps to gain and grow your own market as well.”

Chartier at the UN believes China’s advances in rail put it on track to tap the country’s potential.

“The internal Chinese markets are not fully open yet. There are huge segments of population in the hinterland areas. These railway projects are opening them up for social inclusiveness and economic development,” he said.

“Railways are a powerful tool for China to open up vast expansive markets, including its own.”

Laying tracks for change in Laos China-backed railway expected to lift the overall economy of a landlocked country that has been held back by poor infrastructure

October 2-8, 2017
By DENG YANZI
and LI YINGQING in Mohan, Yunnan

In Mohan, a small town in Southwest China’s Yunnan province bordering Laos, the construction of the Friendship Tunnel is making brisk headway seven days a week.

The 9.68-kilometer railway tunnel will connect both sides of the border, with 7.17 km in China and 2.51 km in Laos.

The boring of the tunnel began in June last year. Running slightly behind schedule due to challenging geological conditions, the project is scheduled for completion in July 2019.

“The railway tunnel starts here in China’s Mohan, and the other end will be in Boten of Laos,” said Zhang Shuai, secretary and engineer of the tunnel project contractor China Railway No 2 Engineering Group, as he pointed to an underground passage below the rolling mountains.

“The Friendship Tunnel is China’s first railway tunnel that crosses the border,” he added.

When completed, it will be a crucial link for passenger and freight trains, and key to the China-Laos railway, which will connect the rail networks of both countries.

Chen Lijun, researcher and director of the Institute for South Asian Studies at the Yunnan Academy of Social Sciences, believes the new railway will boost the economy of the rural town of Mohan.

“Just as the Chinese saying goes, better roads lead to better life. Mohan residents will see more new houses and cars as the town becomes a major node on the China-Laos railway,” he said.

There is a similar sense of anticipation for Boten and other areas in Laos near the border.

Construction of the Friendship Tunnel connecting Laos and Southwest China’s Yunnan province is set for completion in July 2019. Credit: Tanya Wang / For China Daily Asia Weekly

Boten is the starting point of the 414-km China-Laos railway to Vientiane, the Laotian capital. It is the first overseas rail route linking China’s network, using Chinese technology and investment.

With a total investment of 40 billion yuan ($6 billion), the Chinese and Laotian governments established a joint venture last year to build, manage and operate the railway.

China will finance and own 70 percent of the venture, while Laos will be responsible for the remainder.

The challenging project will see China exporting its top railway technology, with more than 62 percent of the route requiring bridges and tunnels.

Six Chinese companies have successfully bid for the construction of the Boten-Vientiane railway, ensuring the application of Chinese standards, equipment and technology.

“The success of the China-Laos railway will have an international significance, manifesting China’s true ability in taking its railway technology abroad,” said Luo Hengfu, China Railway No 2 Engineering Group’s project manager for the Friendship Tunnel at Mohan.

The railway construction project will involve 20 Lao firms as subcontractors, supervised and assisted by Chinese companies.

“We will try to ensure that this multibillion-dollar project benefits local companies as well,” Koung Souk-Aloun, director of the construction project and of the Lao National Railway Company, told the Vientiane Times last September.

The Lao section of the railway will run south toward Vientiane through the provinces of Luang Namtha, Oudomxay and Luang Prabang.

The opening of the China-Laos railway is expected to lift the overall economy of Laos that has been constrained by poor transportation, which results in costly logistics.

Work on the Lao section commenced officially in March in Luang Namtha, with the route’s overall completion date set for 2021.

When up and running, the Vientiane terminus will be linked to the railway network of Thailand that stretches to Bangkok, and further connected to Kuala Lumpur, capital of Malaysia, and eventually to Singapore.

Passenger trains will run at 160 km per hour in mountainous areas and up to 200 km/h on the plains, while freight trains will run at 120 km/h.

The opening of the China-Laos railway is expected to lift the overall economy of Laos that has been constrained by poor transportation, which results in costly logistics.

At the moment, the only railroad in Laos is a 3.5-km extension of Thailand’s state railway network.

Roads still dominate the transport sector in Laos, representing 98 percent of the total travel of passengers and 86 percent of freight moved, according to the Lao Ministry of Public Works and Transport.

According to a recent study by the Japan External Trade Organization, logistics costs in Laos are as high as double those of other countries in the Association of Southeast Asian Nations, likely due to poor basic infrastructure. The cost in Laos works out at $2.50 per km, while in Thailand it only costs $1.10 per km, the study showed.

The China-Laos railway will prove to be a drastically cheaper and more efficient alternative.

The journey from Vientiane to the Boten border point will be reduced from around three days by road to less than three hours by rail. Freight rates will also be reduced to 269,750 kip ($32) per ton, only one-third of the price by road transport, according to a study by Lao authorities.

Passengers, on the other hand, will benefit from cheaper fares at around 161,850 kip, nearly half the current fare by road, Somsavat Lengsavad, former deputy prime minister of Laos, told the Lao National Assembly last year.

The country can expect 6.11 million passengers annually in the first few years of the railway’s operation and 8.62 million passengers each year in the long term.

“Logistics costs have a significant impact on our companies in the area,” said Liu Hu, general manager of the Saysettha Development Zone near Vientiane.

Foreign investors are pinning high hopes on the China-Laos railway to cut costs and enable the flow of goods and people in Laos.

The opening of the railway will be a boon to the flourishing Saysettha Development Zone near Vientiane, whose gate is merely 1 km away from the capital’s terminus, according to Liu Hu, the zone’s general manager.

As a collaborative project between the Chinese and Laotian governments, the project is a state-level special economic zone in Laos. By 2030, it aims to accommodate 150 companies in industries including agricultural products, machinery manufacturing and logistics.

“Logistics costs have a significant impact on our companies in the area. When the China-Laos railway starts service in the future, it will dramatically reduce the costs of transporting raw materials and products into and from our development zone,” said Liu.

Liu, who is also vice-general manager of Yunnan Provincial Overseas Investment, the Chinese investor behind the Saysettha project, added that the railway can ramp up domestic and foreign investment in Laos.

“It will definitely boost the confidence of investors, as it smooths the way for cheaper and faster logistics,” Liu said.

Contact the writers at iris@chinadailyhk.com

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