American paranoia: Growing pressure on Chinese railway giant CRRC
Author: Branimir Vidmarović
21st February 2019
COMMENTARY - Are Americans paranoid, the prestigious Financial Times has wondered in recent days.

The US authorities have begun to care for the underground wagons produced in China. Fresh suspicions fall to CRRC - Chinese Railway Corporation. The state holding has won four of the five major US tenders for the Los Angeles, Chicago, Philadelphia, and Boston railroads totaling $ 2.5 billion.

CRRC is currently participating in a $ 4 billion worth of wagons in the famous New York subway.

With the brink of bilateral relations between China and the US and the growing pressure on the Huawei, US lawmakers also paid attention to the wagon manufacturer. According to the Financial Times, some senators want to block a $ 1 billion worth of 800-barrel wagon production in the heart of American politics - Washington DC. The Washington political hawks take care of the security aspect. It is suspected that the CRRC may, if not already, incorporate spy telecommunications equipment into wagons that would endanger existing hotspots. CRRC is a problematic company for US lawmakers.

Firstly, there is no adequate competition on the market or a viable alternative. There is no large domestic wagon producer with the same capacities and knowledge. The first competitors, the South Korean Hyundai Rotem and the Japanese Kawasaki Rail Car are more expensive for several hundred million dollars, the Financial Times warns.

Secondly, it's hard to seriously damage a CRRC company. The underground wagons account for only 15 percent of the holding's income. Most money CRRC is making on the development and production of trains. The revenue stream is the development of new directions of business. Holding closely cooperates with the Chinese state in the field of renewable energy, the shipbuilding and software component. Even 85% of the total earnings of the holding are realized in China and in the Pojas and Way project.

Third, and probably most importantly - CRRC has a factory in Springfield, which produces certain wagon parts. As the American portal WAMC Radio writes, the factory currently employs about 120 workers and raises that number to a total of 300 workers. The company has recently asked the government for the exemption from newly-made 25-percent customs duties on steel and similar products. Most CRRC parts are imported from China. Washington has refused to comply with the holding's claim, endangering existing jobs, contractual obligations and the price of the bidding. WAMC Radio states that Senator Eric Lesser, one of the few politicians who supported the holding's claim, warned of losing the original sense of tariff introduction.

"I'm disappointed. The tariff, as claimed, was in the protection of domestic industrial jobs. But in Springfield, tariffs could harm existing workplaces, "Lesser said.

Similar opinion is also given by Rick Sullivan, President of the Economic Development Council of West Massachusetts who claims that the Chinese holding has established partnerships with local schools and buys products and services from local companies.

On the other hand, the Defense One website describes in depth all forms of potential security inconveniences that can come from deeper penetration of CRRC into the US market than hacking cameras and using advanced Chinese tracking and facial recognition systems to create a detailed sample of passenger movements. In the opinion of the portal, one of the major problems are freight trains due to the risk of insight into sensitive loads such as toxic materials, weapons and the location of embarkation and destination. In addition, the growing Chinese role in wagon production will only reduce, not increase jobs in relevant industries.

Currently, the second round of trade negotiations between the two countries is under way. As time moves, the atmosphere is all the more tense, and the parties are more and more convinced of the correctness of the chosen paths and policies. The Chinese side traditionally expresses more optimism, but claims it will not lean on topics that would radically endanger its current economic and development model.






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