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China - Schnellzug
Image: picture-alliance/dpa

China wins huge contract

Srinivas Mazumdaru
November 20, 2014

A state-owned Chinese rail company has signed an agreement with Nigeria to construct a railway line along the West African nation's coast, a project dubbed as China's biggest foreign infrastructure deal to date.


China Railway Construction (CRCC) concluded the official contract worth $12 billion (9.6 billion euros) with the Nigerian government on Wednesday in Abuja, Chinese news agency Xinhua said.

The 1,402 kilometers (871 miles) railway track would be laid along the coast, linking the country's commercial capital Lagos and the city of Calabar, said the report. Trains would travel at a maximum speed of 120 kilometers per hour on the rail link, it added.

CRCC chairman Meng Fengchao was quoted by Xinhua as saying that the Nigeria project would adopt Chinese technological standards and lead to $4 billion-worth of Chinese exports of construction machinery and other rail equipment.

Terming the project as "mutually beneficial," Meng said it would create up to 200,000 local jobs during the construction and a further 30,000 positions once the line is operational.

The news comes shortly after Mexico annulled a $3.75 billion high-speed rail deal with a Chinese-led consortium headed by CRCC evoking transparency concerns.

Moving up the value chain

China is pushing to sign railway construction projects across the world in an attempt to export its high-speed rail technology and move the country's manufacturing sector up the production value chain.

China - Schnellzug
Chinese rail companies are now actively seeking markets overseas to sell their products.Image: picture-alliance/dpa

China initially bought trains and related equipment from foreign manufacturers, but its engineers later re-designed the machinery and succeeded in building their own trains capable of reaching top speeds between 350 and 400 kilometers per hour.

Chinese rail companies have mastered the technology to build the trains and are now actively seeking markets overseas to sell their products, thus competing with the established players in this segment.

It is reported that China South Locomotive & Rolling Stock Corporation (CSR), the country's largest train manufacturer, signed a contract in June 2014 with Macedonia's national railway company to sell six bullet trains.

The agreement follows deals made by China with several other Eastern European countries, including Romania and Hungary, to build high-speed rail lines.

Growing demand

China's sales pitch abroad is also backed by massive amounts of investment at home. The country has so far poured some $500 billion into building its domestic high-speed rail infrastructure.

The Asian nation currently boasts more than 11,000 kilometers of dedicated high-speed train tracks, reflecting Beijing's desire to boost economic activity in the country through the allocation of resources towards massive infrastructure projects.

Furthermore, the scale of domestic high-speed rail network construction has led to a decline in production costs for Chinese manufacturers.

China - Schnellzug
China currently has more than 11,000 kilometers of dedicated high-speed train tracks.Image: picture-alliance/dpa

It has made them more competitive than European rivals, notably in Germany and France, particularly in emerging markets where rapid population growth and migration are expected to drive demand for high-speed trains over the next two decades.

Rajiv Biswas, chief Asia economist at analytics firm IHS, told DW that Chinese high-speed train manufacturers would become "more significant competitors in developing countries." Beijing could use its "competitive advantage in costs" to win international tenders, offering, in addition, funding through its development banks.

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