Iron Silk Road:  The Rise of China and the Expansion of High Speed Railways
By Sirma Altun Kucukarslan

Iron Silk Road: The Rise of China and the Expansion of High Speed Railways

Apr. 05, 2016  |     |  0 comments


The reproduction of Chinese capitalism has been one of the highly debated issues within political economy circles since China entered the world scene as a major economic and an emerging political power. From the 1990s on, China has grown to become the world’s largest industrial producer and a crucial geopolitical site for capital accumulation. The current account deficit of the US, on the other hand, has been growing and is largely accounted for by China (Hung, 2013). However, as Kiely (2012) suggests, the rise of China cannot be simply explained in terms of the increase of the US current account deficit and China’s purchase of US debt and other dollar assets. Rather, China’s rise needs to be situated in the context of contemporary capitalism by looking at various mechanisms. For Hung (2013), to understand the rise of China, it is necessary to “look beyond the world of international currency and financial transactions and examine the internal political economy of China’s export-oriented industrialization” (p. 1350).


The Iron Silk Road project is a notable case where China’s economic power overlaps with its political power, as China is the leading initiator and fund raiser of the project through its Western Development Strategy and New Silk Road Diplomacy.


As put by Wang (2012), the Chinese Communist Party’s (CCP) Western Development Strategy is based on four main pillars. First, it seeks to ensure harmony and stability in the western parts of China, i.e. Xinjiang, through a regional development policy combining social policies and economic measures. Second, it aims to secure the supply channels for oil and other commodities to China through the construction of the New Silk Road that would extend to Europe and the Mediterranean coastal countries. Third, it targets the increasing cooperation with “all West Asian countries” including countries in South Asia, Central Asia, and the Middle East, in economic and political terms. As put by Gonzalez-Vicente (2011), the transnational operations of the State Owned Enterprises (SOEs) of China are not purely market practices but are also backed by diplomatic lobbying and governmental interventions. In addition to building economic and political cooperation, the Western Development Strategy aims to increase cultural and social communication between China and the West Asian countries via diplomatic interactions.


Geopolitics is a very critical dimension of China’s High Speed Railway (HSR) construction and exports. Hence, an understanding of the rise of China in this article will be developed by investigating the relationship between the expanding HSR projects within China and abroad and the form of contemporary Chinese capitalism. In other words, the key questions are: How are the construction and export of HSRs related with the reproduction of Chinese capitalism? What is the role of construction and export of HSR for the production, mobilization, and absorption of surpluses of capital and labor power in China?


The Expansion of High Speed Railways


According to Hung (2013), China replicates the East Asian model of development based on export-led industrialization, low domestic consumption, and high savings (p. 1351). For Kiely (2008), in analyzing Chinese development, the current legacies of the world economy such as free trade embodied in WTO regulations and conditionalities, and the internationalization of capital that lies behind the interdependence of the Chinese and US economies today, should not be undermined. On one hand, the coupling of underconsumption sourced by the repression of domestic demand, and overinvestment backed by the non-performing loans of the state-owned banks, has rendered the Chinese political economy significantly prone to an overaccumulation crisis (Hung, 2009). On the other hand, the legacies of the neoliberal world economy have globalized the effects of the economic crisis in the US (2008-2009) and turned it to a global economic crisis (Panitch & Gindin, 2012).


Especially after the decline of external demand for Chinese exports since the 2008 crisis, massive investment in physical infrastructure and public services have helped to sustain economic growth (Sahoo, Dash & Nataraj, 2012). The Western Development Strategy proposed by the CCP and the stimulus packages unveiled after the 2008 crisis to sustain economic growth should be understood in this context. The CCP unveiled a RMB 4 trillion stimulus package at the end of the 2008 to finance investments in areas including low-income housing, rural infrastructure, water, electricity, transportation, technological innovation, and disaster rebuilding. Among infrastructure spending, transportation had the number one share covering 5.2 percent of GDP in 2006, even before the high tide of HSR expansion. However, as Table 1 shows, the increase in investment in rail lines including high speed railways was notable especially after 2007.


Table 1. Investment in Rail Lines

Year

Total Investment in Rail Lines (inc. HSR)

2004

$ 14 billion

2006

$22.7 billion

2007

$26.2 billion

2008

$ 49.4 billion

2009

$ 88 billion

2010

$ 100 billion

Source: Swiss Rail Industry Association. (January 2011). China Railway Market Study, p.17.


The state has a distinguished role in the expansion of high speed rail in China through its management, planning, and financing of rail lines (Swiss Rail Industry Association, 2011). HSR construction projects are issued in the Five Year Plans of the National Development and Reform Commission (NDRC). The NDRC works in collaboration with the Ministry of Transport and the Ministry of Railways. Besides, highly capital intensive HSR construction projects are generally funded by state-owned banks and financial institutions. The State-owned Assets Supervision and Administration Commission (SASAC) of the State Council supervises all key Chinese railway enterprises. The performance of railway enterprises is strictly measured by the SASAC. High-speed railways are also one of the strategic focuses of the China Development Bank (CDB). The construction of the north-south and east-west national high-speed railway networks was financially supported by the CDB. In addition, the international expansion of the Chinese railway industry is supported by the CDB through the funding of railway network and railway construction. The CDB invests in international projects and supports overseas investments of Chinese enterprises in line with the “Go Global” strategy of CCP.


Table 2. Key Chinese Railway Enterprises

Name

Business Spectrum

Headquarters

China Railway Group Ltd. (or China Railway Engineering Corporation- CREC)

www.crec.cn

Surveying and designing, construction and installation, manufacturing, research and development, technical consulting, capital management, international business activities

Beijing

China Railway Construction Corporation Ltd. (CRCC)

www.crcc.cn

Construction contracting, surveying, designing, research and development, industrial manufacturing, consultation, real estate, capital operation, logistics

Beijing

China South Locomotive and Rolling Stock Corporation Limited (CSR)

www.csrgc.com.cn

Research and development, manufacturing and service of railway locomotives, passenger trains, freight wagons, bullet trains, metro vehicles and relevant parts.

Beijing

China North Locomotive and Rolling Stock Corporation Limited (CNR)

www.chinacnr.com

Research, development, design, manufacturing, refurbishment, overhaul and service of Rolling Stock, Urban Rail Vehicles, Engineering Machinery, Electromechanical Equipment, Electronic Equipment and related units.

Beijing

China Railway Signal & Communication Corporation (CRSC) www.crsc.cn

National railway signal & communication, transportation information and control integration, urban transit, mine railway, harbors, airports and express highways.

Beijing

Sources: Swiss Rail Industry Association. (January 2011). China Railway Market Study; webpages of the enterprises.


Among the key Chinese railway enterprises, China Railway Construction Corporation Limited (CRCC) is the largest overseas engineering contractor with operations in 60 countries including Hong Kong, Nigeria, Algeria, Turkey, Israel, Tanzania, and Zambia. CRCC’s operations include project contracting, consultation, industrial manufacturing, real estate development, logistics, trade of goods and materials, as well as capital operations. CRCC runs under the administration of the SASAC.


As described in the China Railway Market Report (Swiss Rail Industry Association, 2011), the construction of HSRs was justified by the government in three aspects. First, HSRs aim to support the accelerating productivity and competitiveness in the long-run through increasing transport capacity and links between labor markets. Second, during the economic downturn, HSR projects created jobs and employment, and also created demand for the steel and cement industries. Lastly, HSR projects became the medium for technology transfer and the localization of production processes. For Garver (2006), the ability of China to apply modern transportation technology has not been widely studied as an aspect of its “rise.” However, transportation networks built by China are significant mainly in two respects. First, transportation networks are manifestations of the fiscal power of China in its investments in the “technological subjugation of the distances.” Second, “new lines of transportation will be bearers of Chinese influence” (p. 2). Accordingly, Holslag (2010) claims that regional transportation networks constructed by China will contribute significantly to its leadership in Asia. Transportation networks will provide China with new and diversified supply lines and consumer markets, helping it to spread its regional economic influence. Besides, Wade (2013) claims that China promotes its high speed railway technology both as a diplomatic as well as an economic tool. From India to Turkey, from Southeast Asia to Central Asia, there is a discussion going on about China’s vision of a trans-Asian railway network and its railway diplomacy. Railway diplomacy based on providing transport infrastructure and financial backup for countries, including ones with difficult credit histories, constitutes a prominent feature of China’s foreign policy (Barrow, 2010).


Conclusion


There is a growing journalistic literature on HSRs in China due its longest mileage of railways in the world; however, this literature lacks consistent theoretical grounding. Thus, the recent phenomenon of HSR transport is open to more scholarly research and theorizing. It is important to theorize the recent phenomenon of expanding HSR projects within China and abroad, understanding their relation to contemporary Chinese capitalism. The rise of China from the perspective of the expansion of High Speed Railways is certainly an unexplored field of study that will provide promising insights for understanding China today.


References


Barrow, K. (2010). The rise of Chinese railway diplomacy. International Railway Journal. Retrieved from http://www.railjournal.com/index.php/news/the-rise-of-chinese-railway-diplomacy.html


Garver, J.W. (2006). The development of China’s overland transportation links with Central, South-west and South Asia. The China Quarterly,185, 1-22.


Panitch, L. & Gindin, S. (2012). The Making of Global Capitalism: The Political Economy of American Empire. New York: Verso.


Gonzalez-Vicente, R. (2011). The internalization of the Chinese state. Political Geography, 30, 402-411.


Holslag, J. (2010). China’s roads to influence. Asian Survey, 50(4), 641-662.


Hung, H. (2009). America’s headservant? Dilemma of China in the global economy. New Left Review, 60(Nov/Dec).


Hung, H. (2013). China: Saviour or challenger of the Dollar hegemony? Development and Change, 44(6), 1341-1361.


Kiely, R. (2008). Poverty’s fall / China’s rise: Global convergence or new forms of uneven development? Journal of Contemporary Asia, 38(3), 353-372.


Kiely,R. (2012). Spatial hierarchy and/or contemporary geopolitics: What can and can’t uneven and combined development explain? Cambridge Review of International Affairs, 25(2), 231-248.


Sahoo, P., Dash, R.K. & Nataraj, G. (2012). China’s growth story: The role of physical and social infrastructure. Journal of Economic Development, 37(1), 53-75.


Swiss Rail Industry Association. (2011). China Railway Market Study: Final Report. Retrieved from http://www.s-ge.com/de/filefield-private/files/1673/field_blog_public_files/7908


Wade, G. (2013). Changing Asia: China’s high-speed railway diplomacy. The Strategist. Retrieved from http://www.aspistrategist.org.au/changing-asia-chinas-high-speed-railway-diplomacy/


Wang, J. (2012). “Marching westwards”: The rebalancing of China’s geostrategy. International and Strategic Studies. Center for International and Strategic Studies Peking University Report, No.73, October 07, 2012.

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