The importance of China’s high-speed tech transfer policy

China is the world leader in the deployment of high-speed rail infrastructure but how much of this is because of the extensive technology transfer deals that were struck with foreign companies during the early days?


China high speed rail

In December, the 2,252km Shanghai-Kunming high-speed rail (HSR) line was officially completed, with the opening of its final phase. Crossing the five provinces of Zhejiang, Jiangxi, Hunan, Guizhou and Yunnan, it cuts travel time from Shanghai to the capital of South West China's Yunnan province Kunming from 34 hours to just 11.

According to the China Railway Corporation, the line has been designed for 350km/h operation, with trains initially running at up to 330km/h. In most countries, this would be greeted with surprise that a project of such size and scale had indeed come to fruition.

However, this is China, the superstar of HSR. It’s easy to forget that this is still a very young industry when one looks at the size of the country’s network. It was in 2003 when the 200km/h Qinhuangdao-Shenyang HSR opened. Back then, few could have predicted that by 2017 China would have 20,000km of high-speed route, zig-zagging across the country.

To put it in perspective, that’s more than the rest of the world combined. Where once it followed, China now leads. The country competes, mainly with Japan, to sell its expertise worldwide, from Europe to closer to home in Asia. It is actively, and rapidly, developing its own technology, designed to better what the best and brightest European firms can offer.

China has the political will, the cash and the sheer determination to get things done. Most of all, though, much of the earlier progress came about due to technology transfer.

Sharing rail technology for market access

Extensive technology transfer deals with foreign companies were the order of the day during the formative years of China’s HSR. And, although they are less common now, it is acknowledged that they were a fundamental cog in the machine.

Back then, the likes of Alstom, Bombardier, Siemens and Kawasaki Heavy Industries, were required to form joint ventures or partnerships with Chinese manufacturers and transfer key pieces of their technology.

As they saw it, here was a chance to get a slice of a huge market. For China, it was a priceless opportunity to shorten its route to the top. Yes, it had to open its doors to foreign firms, but the benefits far outweighed the disadvantages.

For example, back in 2005 Siemens agreed to work with its Chinese partner company to build 60 high-speed trains, based on their Velaro model, which has been used in Germany, Spain and Russia. Siemens subsequently developed a 16-car train to reach speeds of 350km/h in passenger service on the Beijing-Shanghai line. A press release dated November 2005 highlights: “Part of the contractual terms and conditions involves technology transfer in connection with [the] production of the trains.”

"Technology transfer was common during the formative years of China’s network."

When asked for more information on its technology transfer policy, a Siemens spokesperson says: “Siemens has long been one of the most trustworthy and closet partners of China’s high-speed industry. With our technologies serving multiple main high-speed lines in China, Siemens is proud to be part of China’s effort to build up the world’s largest high-speed network.

“We are open to various types of cooperation for win-win results and hope to continue to make contributions to China’s high-speed development.”

In addition, Jianwei Zhang, president of Bombardier China, said in 2009: “Whatever technology Bombardier has, whatever the China market needs, there is no need to ask.”

“There were ambitions to get everything done pretty quickly,” says Yatang Lin, a researcher from the London School of Economics’ Centre for Economic Performance. “Of course, there were political motives there. Therefore, the fastest and safest way was to use foreign technology.”

Jia Limin, a professor at Beijing Jiaotong University, put it bluntly, when he told the CKGSB Knowledge website: “We couldn't achieve anything without them.”

For China, maintaining a sense of ownership is key. “Chinese companies could learn while the HSR network was being constructed,” adds Lin. She adds that the size of China’s market - as the world’s second largest economy - gives the country plenty of “bargaining power” when attempting to finalise deals. As she puts it: “They can get a lot from foreign companies.”

China: from importer to exporter

Lin’s research has analysed if it is valuable for a developing country to introduce foreign technology. “Can it absorb the technology? If so, why?” she asks.

Similar research, from the University of Oxford’s Department of Economics, published in 2012, states that international joint ventures and technology transfer agreements can contribute to faster growth, helping countries “catch up” with the world’s leading economies. The paper concludes: “We estimate that without international joint ventures China's growth would have been about one percentage point lower per annum over the last three decades.”

It is fair to assume that a similar drop might have been befallen the HSR sector without technology transfer. It is, of course, far easier to build on and refine what is already there than start from scratch. The success of integrating foreign technology can be seen in China’s zeal to export its expertise only a mere decade or so since it fully embraced HSR.

"China is now exporting its HSR expertise."

In 2005, The China Railway Construction Corporation and China National Machinery Import and Export Corporation won the contract to build Turkey’s Istanbul-Ankara high-speed line, which was inaugurated in 2014.

China and Thailand have also agreed the first phase of a line to link Thailand's border with Laos with ports and industrial zones in the east, said to be worth $5.15bn. It was also revealed last year that a Chinese-built next-generation bullet train that will reach 400km/h will run on Russia’s 770km Moscow-Kazan route, which will connect seven Russian districts and forms part of the wildly ambitious plan to link Moscow and Beijing via a 7,000km network.

Reports also suggest China will fight it out with its rival Japan for a potential Bangkok-Kuala Lumpur high-speed line, among other projects.

The collision in Wenzhou in Zhejiang province in 2011, which caused 40 deaths and hundreds of injuries, does temper the enthusiasm of some, however. Subsequent investigations attributed the crash to design failures and a lack of sufficient testing.

Nevertheless, the Chinese Government is committed to expanding its HSR network to 30,000km by 2020, covering approximately 80% of major cities. A vision that is just as daring as the technology transfer agreements that preceded it.