A consortium of rail companies in China partnered with Xpress West Enterprises, a private company in the United States to build a high-speed railway connecting Los Angeles to Las Vegas.
According to Shu Guozeng, an official of the Communist Party’s financial and economic affairs, the construction of the 370-kilometer Southwest Rail Network will start in September next year. The South Rail Network will be first bullet-train project in the United States.
Michael Mauboussin: Here’s what active managers can do
Mr. Shu added that the railway project would create new construction, manufacturing, and technology jobs in the region.
The Chinese railway companies reached an agreement with Xpress West after four years of negotiations. The parties signed the deal prior days prior to the state visit of Chinese President Xi Jinping to the United States.
China and the United States are expected to sign agreements on aviation, climate, energy, finance, and trade during Pres. Xi Jinpings visit to Washington.
Economic and trade cooperation will be a major topic for president Xi’s visit to the US, said. Mr. Su. He added that both countries share common interests and have solid foundation for cooperation.
During a press conference, Yang Zhongmin, chairman of China Railway International said, “This is the first high-speed railway project where China and the US will have systematic cooperation. It shows the advancement of China-made high-speed railways.”
“As China’s first high-speed railway project in the United States, the project will be a landmark in overseas investment for the Chinese railway sector and serve as a model of international cooperation,” he added.
China achieved a big step forward
China’s deal to build the South Rail Network is a big step forward in its effort to market its high-speed rail technology in developed countries. The Chinese government through Premier Li Keqiang has been pushing its high-speed technology in emerging markets.
Th deal also served as an important victory for China in its competition against Japan in high-speed rail. Both countries have been competing for train contract across Asia.
Several years ago, Japan’s largest bullet-train makers expressed interest in the Los Angeles to Las Vegas railway. China and Japan are expected to submit proposals to supply trains for the proposed high-speed railway in California’s Central Valley.
China struck its first rail-related agreement in the United States in October. China signed a $567 million contract with Boston’s subway system to supply trains.
Initial capital for the high-speed rail project
Based on the joint statement of China Railway International and XpressWest, the high-speed rail project has an initial capital of $100 million.
XpressWest indicated in its website that cost of the project is approximately $6.9 billion (including the construction, implementation and rolling stock).
Gary Wong, an analyst at Guotain Junan said the China probably obtained little financial benefit from the project, but it is a significant deal because it will open the undeveloped high-speed rail market in the United States.
Wong said, “If this opens up the United States market for them, opportunities for future expansion will increase. And if (their technology) is used in the United States, it will be easier for them to sell to other countries.”