George Osborne has made a major commitment to investing in UK infrastructure with the announcement of a new independent commission to oversee it. In particular, he has emphasised the role of railways in making Britain “great”. But, as with Osborne’s plans for nuclear energy, he will be turning to China for help in building this costly infrastructure.
Osborne’s recent overture to the Chinese to bid to build the first phase of a new high-speed rail system between London and Birmingham (HS2) has left many in the UK perplexed and dismayed. The charge of kowtowing to the Chinese to take on this £11.8 billion project has been made and the UK chancellor has also been accused of acting in contempt of the country’s legislature – as legislation enabling HS2 to proceed has yet to be formally signed off by the Queen.
Underlying complexity
Inevitably, the headlines understate the underlying complexity. On the one hand, the chancellor seems keen to link the UK with the newly-created Chinese Asian Infrastructure Investment Bank. Such is Osborne’s commitment to this bank that he overrode strong objections from the Foreign and Commonwealth Office as well as the US president, Barack Obama, and the World Bank when he made the decision to join it.
Through this source the chancellor is also hoping for Chinese investment in the new nuclear power station at Hinkley Point, which carries a price tag of £25.5 billion. High-speed rail is, however, a more popular investment prospect than nuclear power. Canadian pension funds, for example, have already heavily invested in high-speed rail – it was only a few years ago that one acquired HS1. And these funds have signalled strong interest in further investment opportunities, including HS2.
Yet there is a possible technical link here between the HS2 project and a new energy source like Hinkley Point. Quite simply, if the HS2 scheme achieves its design goal of an operating speed of 250mph, it will require access to a significant new power source. So there is some urgency to steer finance into both projects.
Global leaders
Certainly, the HS2 project appeals to Chinese interests in purely business terms. The Chinese government is keen to position itself as a global leader in the field after developing the technology domestically to link its widely dispersed nation of 1.5 billion people. Beginning in the 1990s, Chinese engineers bought trains and technology from foreign firms such as Japan’s Kawasaki, Germany’s Siemens, the French Alstom, and Bombardier in Canada. They then adapted and reverse-engineered the imported technology until they evolved their own. Since 2003, China has laid more than 16,000km of high-speed track – more than half the world’s total – with 9,000km more planned by 2020.
But this rapid development has come at the cost of human life. First, in 2008, 72 people died when an express train from Beijing to Qingdao derailed. But in July 2011, in eastern Zhejiang province, another high-speed train crash killed 38 and injured 192. Failures in the signalling system caused a derailment of two trains and resulted in four carriages falling off a viaduct.
In a bid to stifle news or comment about this tragedy, officials ordered the burial of the derailed cars. People became reluctant to use the service as public confidence in high-speed rail eroded and China’s reputation in high technology faced international scrutiny.
Learning from experience
China claims to have learned from these accidents and now wants to build foreign earnings and influence using its hard-won experience in building the fastest high-speed rail systems in the most challenging conditions. Already Chinese rail builders have been selected to build a high-speed rail line between Belgrade in Serbia and Budapest in Hungary, as well as a new route to link Mombasa and Nairobi in Kenya. There is even a possibility of China’s participation in California’s high-speed rail project.
Plus, it is difficult to think of another source which could meet the strict specifications for rail tracks, rolling stock and signalling set out in the plans for HS2 – which bring the total cost to around £50 billion.
Yet there is something which both the UK and China may need to consider as Chinese companies are persuaded to sign up for the HS2 scheme. As we have seen in Africa and South America, Chinese businesses seeks to present themselves as scrupulously politically neutral when working overseas. It would be naive in the extreme to imagine that the progress of work on HS2 will not be attended and affected by local demonstrations and occupations. The prospect of middle-class protesters chained to mechanical diggers while dismayed Chinese project managers look on and police seek to clear the way for a very time and cost-sensitive project, is not one Chinese PR managers will want to see on the British tea-time news.