They thought they'd be getting access to a booming new market, billions of dollars' worth of contracts and the cachet of creating the most ambitious rapid rail system in history.
What they didn't count on was having to compete with Chinese firms at their own game just a few years later.
Today, Chinese rail companies that were once junior partners with the likes of Kawasaki Heavy Industries Ltd., Siemens AG, Alstom SA and Bombardier Inc. are vying against them in the burgeoning global market for super-fast train systems. From the U.S. to Saudi Arabia to Brazil and in China itself, Chinese companies are selling trains that in most cases are faster than those offered by their foreign rivals. On a recent visit to China, California Gov. Arnold Schwarzenegger said he is interested in Chinese help to build a planned high-speed line in his state.
The progression of China's rail business reflects a national economic strategy of boosting state-owned firms and obtaining advanced technology, even at the expense of foreign partners. It's an approach that is challenging the U.S. and other powers, and fueling a broader angst among multinational firms doing business here.
Industries such as autos and aerospace have long sought to tap China's vast market, entering into joint ventures that have brought them enormous reward. But by handing over their technology, some companies have opened the door for homegrown competitors to compete in the global marketplace. China's market share of manufacturing of advanced machinery could climb to 30% of global exports within the decade, from 8% today, said Min Zhu, special adviser for the International Monetary Fund and former deputy governor of the People's Bank of China, at Monday's Wall Street Journal CEO Council.
China acknowledges that the trains its own companies are now selling were developed using foreign technology. But officials say domestic companies like China South Locomotive & Rolling Stock Industry (Group) Corp., or CSR, added their own innovations that make the final product Chinese. 'China's railway industry produced this new generation of high-speed train sets by learning and systematically compiling and re-innovating foreign high-speed train technology,' the Railways Ministry said in a faxed response to questions. Some foreign executives say that such 're-innovating,' if it involves selling the trains overseas, is a violation of China's agreements with them.
The future of China's rail industry is being assembled amid a flurry of welding sparks in a sprawling CSR manufacturing complex in the port city of Qingdao. Called the CRH380A, the newest train is equipped with first-class seats that fold completely flat and can go up to 236 miles per hour. When it goes into service in 2012 linking Beijing and Shanghai, the train will cut travel time to four hours from 10, and will be part of a network that is expected to extend 9,700 miles by 2020.
CSR obtained Japanese high-speed technology starting in 2004 as part of a deal with Kawasaki. CSR engineers and executives say they have adapted and improved that technology to make trains that are faster and better. The fastest trains now operating in Japan and Europe run about 199 mph.
Smiling proudly on the factory floor before half-assembled sections of the needle-nosed, blue-and-silver CRH380A trains, Liang Jianying, a senior CSR engineer, explains how the company reduced wheel-to-track friction and made the train more aerodynamic. 'We improved, optimized, and self-innovated . . . and came up with a brand new design,' she says.
'See, this is nothing like Kawasaki's bullet train,' chimes in Wu Qunliang, chief spokesman for the CSR factory. 'Real original innovation is rare,' adds Wang Xinhong, another senior engineer. 'We attained our achievements in high-speed train technology by standing on the shoulders of past pioneers.'
Foreign companies are generally reluctant to criticize the powerful Railways Ministry publicly. Bernd Eitel, a spokesman for Siemens, says the German company has 'a trusting relationship' with its Chinese partners and expects that to continue. Bombardier China President Zhang Jiawei said in a statement that 'we have contracts and agreements, and both sides respect' them. A spokeswoman for the French company Alstom declined to comment, citing the 'sensitive nature' of the subject.
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