Wenzhou accident to have little impact on rail technology sourcing plans of foreign companies

Yang Feng and his relatives look for his wife's body in a funeral home in Wenzhou. He lost four relatives and his unborn child in the bullet train collision on July 23 near Wenzhou, Zhejiang province. Yang said he is now more interested in knowing the cause of the crash than in getting monetary compensation for the loss of his loved ones. [Liu Qiang/for China Daily]

Leading European investors and US lobby groups have said the recent high-speed train crash near Wenzhou, Zhejiang province, that killed 39 people, will have little impact on their plans to source rail technology from China.

British train operator Alliance Rail Holdings, which is negotiating a 2.1 billion yuan deal to buy high-speed rail stock from a Chinese rail-maker, says that reports about the train crash having unnerved foreign companies are untrue.

"We don't think it (the crash) will have any impact on our decision," says Chris Brandon, head of Systems for Alliance Rail Holdings Ltd.

Similar feelings were echoed across the Atlantic by lobby groups keen to see China's rail designs adopted in the United States.

"While we are saddened by the loss of lifewe don't believe that it will have any significant bearing on US plans to move forward with high-speed rail development," says Kerry O'Hare, vice-president of Building America's Future, a coalition aimed at promoting improved infrastructure in the US that was started by former California Governor Arnold Schwarzenegger and New York Mayor Michael Bloomberg.

Tom Skancke, executive director of the Western High Speed Rail Alliance, told China Daily "the derailment in Wenzhou was not a human error from what I have read so far. The Chinese government will work to rectify any issues to ensure the safety of their citizens. Additionally they will work to ensure that their HSR system both in China and any future developments in the US or other countries will be safe as well."

The reactions follow a recent Bloomberg report claiming that the collision between two high-speed trains in Wenzhou would reduce the chances of China selling its rail equipment overseas to "zero".

Shortly after 8 pm on July 23 the D3115 bullet train lost power near the city of Wenzhou after reports of a lightning strike. What truly happened remains the focus of a multi-agency investigation into why another bullet train, the D301, continued on the same track, crashing into the other train.

Four carriages fell 20 to 30 meters from a bridge, killing 39 and injuring nearly 200 people, sparking a wave of controversy over lax rescue efforts and concerns over safety.

It was the latest in a series of scandals to hit China's rail industry since it embarked on a highly ambitious high-speed rail plan that left competing countries astonished.

A string of reports surfaced questioning not only China's rail safety, but also the danger to any future negotiations to supply their technology to the rest of the world.

"There's probably little chance of China winning a high-speed train order in the US," Ryota Himeno, an analyst at Mitsubishi UFJ Morgan Stanley Securities Co told Bloomberg News in a recent interview. "There'll be much more importance placed on safety now."

But Alliance Rail Holdings says its plan to develop two new high-speed rail lines that will connect London with the north of England in record speeds will keep moving.

Brandon says at this time there are no concerns over the safety of high-speed rail and before any major decisions are made Alliance will make sure all the safety protocols are met.

"From the outside we haven't got any concerns with the Chinese manufacturers. We'll certainly be looking at all the options we have had from the start," he says.

Share prices of China CSR Corp, which built the trains involved in the accident, as well as China CNR, the nation's top two rail-makers, declined by more than 10 percent in the first few days of trading after the collision.

However, CSR shares rebounded on July 27 after reports that the company has domestic and overseas orders worth about 6.89 billion yuan (744.3 million euros) in hand for supply of railway stock.

The contracts include the sale of 3.13 billion yuan of rapid transit vehicles to Nanjing Metro Co and 2.5 billion yuan of passenger carriages to China Railway Construction Investment Co and CAMRAIL.

The company has also won smaller orders in Australia and Iran.

Most of the prospective foreign buyers are yet to react and are waiting for the results of the official inquiry into the accident.

"Foreign firms and governments are waiting for the crash investigation result in Wenzhou. The final result to a great extent could determine their impression on the product quality of China's high-speed railway," says Luo Renjian, a senior researcher at the Institute of Transportation Research under the National Development and Reform Commission.

He says the derailment would certainly have a short-term effect on the reputation of China's railways, but until a clear picture is painted of whether or not the accident was due to human error or mechanical failure, it's hard to say how foreign buyers will react.

"Everything will be explained when the result is finally released by the government," he says.

However, foreign investment will play a role in determining whether or not China's newest rail system is a profitable venture.

China has a number of major domestic projects underway and recently opened the 1,318-kilometer Beijing-Shanghai high-speed railway line.

It has also begun looking to expand its operations abroad, having recently inked deals in Argentina, Turkey and Malaysia.

Last year CSR's foreign business rose 69 percent to 13 billion yuan with operating bases in 60 different countries, according to the company's 2010 annual report.

CSR's next planned overseas operation is a bid for California's $40 billion HSR system, which would link San Francisco and Los Angeles in a few hours.

The California High-Speed Rail Authority issued a statement following the crash expressing condolences to the families and friends of those who lost their lives in the Wenzhou accident, but maintained that worldwide high-speed rail has an excellent safety record compared with any other transportation systems.

While analysts say China's chances of growing its rail empire may have taken a hit following the collision, Du Yingfen, a professor at the Institute of Industrial Economics of the Chinese Academy of Social Sciences, says that much of the criticism is due to the cutthroat competition in the field of high-speed rail technology, with major Japanese and European companies acting as China's primary competition.

"The Wenzhou accident might provide an unexpected chance to foreign media and high-speed railway companies to blame Chinese products and export projects because international competition is still fierce in this field," she says.

But, the collision is also likely to create an air of caution for foreign companies looking to invest in high-speed rail systems, Du says.