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2014 Media Kit
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Train crash could curb China rail equipment exports

By: | at 08:00 PM | International Trade  

A deadly train crash in China over the weekend has raised concerns about the safety of the country’s fast-growing rail network and threatens to undermine its plans to export high-speed train technology.

The concerns were enough to push share prices down in Chinese rail companies by as much as 16 percent.

“I think since 2008 China has experienced what we call a ‘great leap forward’ of railway construction,” said Ren Xianfang, a senior analyst at IHS Global in Beijing. “We’ve long had suspicions that this speed of construction is unsustainable.”

The main problem, Ren said, are that the systems in place imply “there are lots of systemic fault lines with China’s management of the high-speed train network” that has resulted in under-investment in the software infrastructure.

“So even though we have very rapid build-out of physical infrastructure, the software management has not kept up,” Ren said. “This accident overall has changed the perception of everything related with China’s high-speed railway, high-speed track and high-speed trains.”

China sacked three senior railway officials a day after Saturday’s crash between two high-speed trains that killed at least 36 people in the country’s worst rail disaster since 2008.

The central propaganda department issued directives to media on Sunday for coverage of the accident, demanding journalists not question official accounts of the deadly train crash, and that fuelled public anger and suspicion about conflicting details of the accident, such as the death toll.

A spokesman for China South Locomotive, which built both trains in a joint venture with Canada’s Bombardier , said signalling operations were to blame for the crash.

“The quality of the trains is fine. Neither had any accidents previously. It’s the signalling system that went wrong,” he said.

High-Speed Ambition
China has been working for years to develop a high-speed rail network to rival Japan’s famed bullet trains and use the technology it has acquired or developed to sell its own trains abroad in an effort to move up the value chain from producing mass market goods to being a hi-tech exporter.

Under Beijing’s five-year plan to 2015, the country will invest between 3.6 trillion and 4 trillion yuan ($540-607 billion) in its rail sector.

Japanese bullet trains, operated by JR Tokai , JR East , JR West and unlisted Kyushu Railway, have not had any accidents involving injuries or deaths since they started running in 1964, said Hideaki Tanaka, an official at the railway bureau of the transport ministry.

Japanese operators have installed the Automatic Train Control (ATC) system on bullet trains, which automatically brakes if trains are approaching too close to one another, said a JR East spokesman, who declined to be named due to company policy.

In Germany, 101 people were killed in a high-speed train crash in 1998. The rail disaster, Germany’s worst in half a century, was caused by a fatigue crack in one wheel, which caused the train to detail.

China has one of the highest-density rail systems in the world, according to Michael Komesaroff of Urandaline Investments in Australia.

“The Chinese are running at least two times the level of anyone else in the world. That means signaling and systems management become more critical,” Komesaroff said.

The crash is a further blow to China’s high-speed railway ambitions after the country’s railway minister was sacked earlier this year and became the subject of a disciplinary investigation over corruption.

“The markets were concerned about possible slowdown of high-speed railway construction when the railway minister was sacked,” said Du Jun, an analyst with Shanghai Securities.

“The accident might have some impact on export of the high-speed rail as overseas clients would obviously have doubts on quality and safety issues. However, it’s a bit too early to draw any conclusions before they find out what exactly went wrong.” (Reuters)