Implications For Second- And Third-Tier Cities, Consumers Immense As High Speed Rail Set To Increase Connectivity#
China's already extensive, but in some places aging, rail system has benefitted greatly from the government's massive stimulus spending over the last twelve months. Earlier this year, the New York Times noted that the Chinese stimulus plan -- which targeted, among other infrastructure projects, highways and railroads -- could likely be a key part of the development of China's interior cities, many of which have yet to reap the same benefits of the country's economic growth as their much larger, east-coast counterparts like Shanghai:
The [Chinese] stimulus plan, one of the world’s largest, promises to carry the modernity of China’s coasts deep into the hinterlands, buying the kind of great leap forward it took the United States decades — and a world war — to build, and priming China for a new level of global competition.
China will spend $88 billion constructing intercity rail lines, the highest priority in the plan. It spent $44 billion last year and just $12 billion as recently as 2004, said John Scales, the transport coordinator for China at the World Bank.
As 2009 nears its end, China's investment in rail infrastructure has not slowed, and in fact remains relatively sustained, due to the size both of the stimulus package and the country itself. Recently, Bombardier Sifang -- Bombardier's Chinese joint venture -- nabbed an enviable contract to sell 80 "super high speed" trains to China, a contract worth an estimated US$4 billion (27.4 billion yuan). From China Daily:
CSR Bombardier Sifang (Qingdao) Transportation Ltd, a joint venture of Canadian train maker Bombardier and CSR Sifang Locomotive and Rolling Stock Ltd, signed a 27.4 billion yuan contract with the Shanghai Railway Bureau, under which the company will build 80 high-speed trains.
The order for Bombardier Sifang's trains, which has a maximum operating speed of 380 kilometers per hour, consists of 1,120 cars. The first train is scheduled for delivery in 2012 with final deliveries expected in 2014, the company said.
Bombardier's share of the contract is estimated at 13.5 billion yuan (US$1.97 billion). The deal includes 20 eight-car trainsets and 60 sixteen-car trainsets based on Bombardier's next-generation ZEFIRO high-speed rail technology. The trains will be manufactured in Qingdao, Shandong province.
While it is unclear which routes these next-generation Bombardier trains will run, the assumption is that China's major emphasis on building up second- and third-tier cities will make these routes a major priority for high speed rail. Aside from the massive Beijing-Shanghai Express Railway project -- slated for completion in or around 2014 -- much of the focus lately on rail infrastructure has to do with the further economic development of China's interior or simply to ease some of the crowding on current train lines during major Chinese holidays.
For retailers, these rail projects could be a major windfall in coming years. With more traffic flowing between the coastal east and interior -- and more shoppers going both directions -- high-profit areas like luxury goods could see major growth. In terms of easing some of China's problems with pollution, the new trains by Bombardier and others, which run extremely efficiently compared to the trains currently on the rails in much of China, could also be a jackpot for China.