TrainTech: Bullets Along the Yangtze

In the Hutong
Listening to Russell Train talk green
1842 hrs.

Just a little over half a year after linking Lhasa into China’s vast rail network and the announcement of plans to build a land bridge linking Beijing and New Delhi, China Rail has linked Shanghai with Nanjing and Hangzhou by bullet trains.

America’s Model Won’t Work Here

In an age of low-cost airlines, a lot of Americans and Europeans look at rail travel as something very low tech, if not somewhat quaint. The very thought of linking the words “rail” and “tech” is a bit of an oxymoron.

China, on the other hand, is coming up against a realization that there are simply too many people traveling and commuting in China to build a long-distance transportation system on roads and airways alone. Rail is going to play as important a role in China as it did in the past, but that in order for it to do so it must become as close a substitution for the automobile AND the long-distance bus (within 500 kilometers) and for the airlines (on longer journeys.)

That means greater speed, higher efficiency, and greater comfort and safety, which in turn means better people and the integration of a range of critical technologies.

In Other Words, China’s Trains Need to Go High Tech

Greater speed means faster transit times, and faster turnaround times at each terminus.

Higher efficiency means full trains, fully utilized rails and minimal energy use per passenger seat-kilometer, not to mention lower-costs overall.

Greater comfort and safety means competing favorably on both categories with air travel.

This will require powerful trains that demand less maintenance, well constructed railroads, better-designed and built train stations (Chinese railroad stations are generally awful – try pulling a wheeled carryon from the front door of Beijing West Station to your compartment on the car, and you’ll get what I mean,) cutting-edge signaling systems, and trains that are much more energy efficient than they are today.

In other words, China’s railroads are going to move – are going to have to move – out of the 19th century and into the 21st, all without driving the cost of basic rail service above what your average Chinese can pay for a ticket. That means efficiencies, and that means better trained people and an investment in a long sequence of technically sophisticated but fundamentally simple upgrades to China’s infrastructure.

The size of the investment and the effort required will be huge, and the opportunities for all companies in the rail system supply chain are significant. I’m not sure I’d want to be in the business of fabricating rail cars: China will clearly take on as much of the fabrication and assembly of rolling stock as possible.

But rolling stock design, interior design, station design, energy-efficient drive trains, entertainment systems, marketing, fare collection, food concessions, parking concessions, communications system, signaling systems, and a host of other products and functions that are going to be essential to China’s Rail Renaissance will have to purchased – in full or in part – from companies outside the core of China’s traditional and plodding state-owned rail industry.

My friend Bob and I were talking last week about an investment opportunity we looked at a year ago in building digital movie theaters in railway stations. Sounds like a tiny opportunity, huh? Sure – until you realize that these ersatz cinemas are grossing in excess of US$25,000 per screen per month at RMB10 per person showing second-run films. Cash flow-positive in 90 days, and basically the last 8 months of the year is pure profit.

Get On Board

Shawn Beilfuss at Asia Logistics Wrap notes that China’s government will be investing US$8 billion a year on railroads by 2010. Note that this figure does not include private investment, concessions, and other forms of non-governmental inputs. In other words, the opportunity represented by rail travel in China is at bare minimums equal to – if not much greater – than that of the Beijing Olympics in the same time frame. (One hopes the money is invested more wisely than in Shanghai’s MagLev white elephant.)

Only trains don’t generate the buzz like the Olympics. Or, as The Grouch said to me as I wrote this, “nobody cares about Chinese railroads because they don’t move Wall Street. The Olympics move Wall Street.”

And that, folks, is the real problem. If you spend all your time in China chasing PR opportunities, you miss your chance to actually build prosperous, profitable businesses.


About David Wolf

An adviser to corporations and organizations on strategy, communications, and public affairs, David Wolf has been working and living in Beijing since 1995, and now divides his time between China and California. He also serves as a policy and industry analyst focused on innovative and creative industries, a futurist, and an amateur historian.
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