Introduction

High-Speed Rail Technology and Innovation: The Past and Future

The Competition Between China, the EU, Japan, and the United States for Global Rail Production and Exports

China’s Mercantilist Toolbox for High-Speed Rail

China’s High-Speed Rail Mercantilism Goes Global

Testing the Hypothesis: Assessing the Comparative Innovation Performance

Policy Recommendations

Conclusion

Appendix 1: Kawasaki’s Battle to Keep Ahold of its Technology in China

Appendix 2: CRRC’s Growing Role in Europe’s Rail Market

Appendix 3: CRRC and Other Chinese Rail Firms’ Global Acquisitions to Access Rail Technology and Markets

Endnotes

Introduction

High-speed rail is a technology-driven sector that has taken decades for the leading Japanese and European firms, and the broader ecosystem of component suppliers in the United States and elsewhere, to master. Yet, over the previous 20 years, China used mercantilist policies to rapidly and unfairly close the gap. For example, it used the development of its massive high-speed rail network to unfairly seize foreign technology and know-how to support its local champion, CRRC, and other rail firms. This diverted huge amounts of revenue that, had China’s high-speed rail network been based on comparative advantage and market-based industrial development, would have otherwise gone to leading foreign firms.

The impact continues to grow as China supports CRRC’s efforts to seize global market share. Chinese rail firms are increasingly competitive with foreign rail firms but remain less innovative. By taking global market share from these more-innovative firms, China’s rail industrial policy continues to detract from innovation in the high-speed rail sector, which otherwise would be developing better, cheaper high-speed rail systems.

Chinese rail firms are increasingly competitive with foreign rail firms but remain less innovative.

China could just as easily have used its vast financial resources to import foreign rail products and rail systems. But it did not want to do that, even as it ran massive trade surpluses with the rest of world. It could have attracted foreign firms to set up their own local production and research facilities as part of a normal pattern of foreign trade, investment, and industrial development. Instead, it wanted local firms to control the rail sector. Over time, China’s mercantilist policies evolved as its firms became more competitive. It ratcheted up restrictions to help those firms move up the value chain and throughout the sector from freight to light rail and metro to large and fast passenger trains, before ultimately getting to the crown jewels: high-speed rail. China wanted to build up its own high-speed rail industry, to sell not only in China but around the world.

China did this through an array of unfair, mercantilist practices. In violation of World Trade Organization (WTO) rules, China linked domestic rail contracts to forced foreign technology transfers. (Local content requirements are common in large rail projects, but forced technology transfers are not). It also compelled two state-owned rail companies to merge to create China’s national-champion CRRC, which has about 95 percent of China’s high-speed rail market, with Bombardier a distant second through its forced joint venture (JV) with CRRC.[1] Over time, local procurement rules increasingly penalized bids involving foreign firms, products, and technology, channeling more procurement contracts to local firms and technology. China also provided huge subsidies and other financial support to domestic firms such as CRRC to not only expand in China, but to “go out” and seize global market share.

Outside of China, the major firms are Alstom (France), Bombardier (Canada, which Alstom recently acquired), Hitachi (Japan), Hyundai Rotem (South Korea), Kawasaki Heavy Industries (Japan), and Siemens (Germany). There are relatively few of these firms, as it takes large and long-term investments in research and development (R&D) and CapEX to develop the necessarily technology and train systems. These companies lead consortiums of other rail firms and component suppliers as part of their bids for government rail contracts. This makes China’s mercantilist approach to high-speed rail especially damaging, as there are few opportunities for these firms and their component suppliers to earn the revenue that further supports innovation in a highly specialized set of technologies. More of the Chinese and global market for high-speed rail would have otherwise gone to these foreign firms—which did, and in many areas still do, lead in terms of advanced rail technology—had they been able to enter and compete on fair terms. If China had taken a more open and collaborative approach, it would have contributed, rather than detracted, from high-speed rail innovation.

The first section of this report summarizes innovation in high-speed rail, including a case study on magnetic levitation (maglev)  technology. The second section analyzes the growing impact China’s approach has had on global markets and foreign firms in Japan, Europe, and the United States. The third section delves into China’s embrace of mercantilist policies for high-speed rail, especially forced technology transfers, massive financial support for domestic high-speed rail firms, discriminatory procurement and market access rules, and its creation of a monopolistic national champion, CRRC. It includes a case study of how China uses “hidden” market barriers in the rail sector to disadvantage foreign firms and products. The report includes two annexes about Kawasaki’s battle to keep hold of its technology in China, and CRRC and other Chinese rail firms’ global acquisitions of foreign rail firms.

The fourth section analyzes how China’s high-speed rail mercantilism has gone global and how CRRC and other rail firms have entered and started competing for a growing share of developed and developing country markets. The report includes an annex that details CRRC’s entry into Europe and what this reveals about its strategy to seize market share in global markets. The fifth section provides a qualitative and quantitative assessment of comparative innovation in the high-speed rail segment among Alstom, CRRC, Hitachi, Kawasaki, and Siemens in looking at R&D spending and patents. It also includes an estimate as to the impact CRRC’s siphoning of revenue and market share has had on Alstom’s (its main high-speed rail competitor) R&D capabilities in terms of patents.

The report concludes by providing a range of recommendations for policymakers from the Americas, Asia-Pacific, Europe, and elsewhere to push back on China’s high-speed rail mercantilism both at home and abroad. Recommendations are divided between measures to restrict China and those that are needed to support market- and innovation-driven firms.

Restricting China and CRRC:

• Countries should block Chinese acquisitions of local rail firms due to Chinese firms benefitting from stolen intellectual property (IP) and huge financial subsidies. In particular, the EU should help individual member states improve their foreign investment screening frameworks.
• Countries should use the considerable powers they have over domestic procurement contracts to exclude Chinese rail firms and work together toward fairer international procurement markets. Public procurement plays a major role in high-speed rail projects, which gives governments a mechanism to promote innovation while screening out bidders for technology theft, unfair state-based financial support, and non-reciprocal market access.
• Countries should push the World Bank to stop all rail-related funding in China and its engagement with Chinese firms in rail projects elsewhere around the world.

Supporting domestic innovation and market-driven firms:

• Countries should provide more low-cost and easy-to-access export financing to help local rail firms compete with CRRC and other Chinese rail firms for foreign projects and sales. Large amounts of such long-term financing are one of China’s main tools for seizing market share around the world.
• Countries should provide financial incentives to host, and help local firms send experts to, international standards discussions related to high-speed rail. The development and use of standards play a critical role in high-speed rail projects.
• Given the state-sponsored nature of CRRC (and other Chinese rail firms), countries should consider allowing their own rail firms to merge to ensure they’re in a better position to compete.
• Countries need to provide more funds as part of a long-term supportive R&D framework for rail firms.

High-Speed Rail Technology and Innovation: The Past and Future

High-speed rail is a complicated technology that has long been a symbol of economic and innovation prowess. The International Union of Railways defines high-speed rail as systems of rolling stock and infrastructure that regularly operate at or above 250 kph (155 mph) on new tracks or 200 kph (125 mph) on existing tracks.[2] High-speed rail has many economic and societal benefits relative to cars and planes. It has lower operating costs and more rapidly connects people, thus enabling greater productivity across every downstream industry that leverages it. High-speed rail also reduces negative externalities such as automobile accidents, highway congestion, and greenhouse gas emissions.

China is the world’s largest market for high-speed rail. It is home to over two-thirds of the world’s high-speed rail lines and operates by far the world’s largest high-speed train service, with over 2,600 pairs of high-speed trains running every day.[3] This is all the more astounding given China only opened its first fully high-speed rail line in 2008. Since then, China has opened thousands of kilometers of high-speed lines with speeds ranging from 200 to 350 kph.[4] To do this, China spent hundreds of billions of dollars on the world’s most expensive public-works project since President Eisenhower’s Interstate Highway System of the 1950s.[5] And China isn’t finished. In May 2020, the China State Railway Group (CSRG)—which owns all high-speed rail services in China—announced plans to link all major cities with more than 500,000 people to the high-speed rail network.[6] In August 2020, it announced plans to double the length of China’s high-speed rail network to 70,000 km by 2035.[7] As part of both economic-stimulus and industrial-development plans (including the Made in China 2025 plan, among others), China has provided hundreds of billions of dollars to mainly Chinese firms to build and operate the network and to fund its firms to develop and manufacture the full range of goods and services that go into integrated high-speed rail projects.

No doubt, China’s massive high-speed rail network has had a major positive economic, social, and environmental impact. The World Bank estimated that the economic rate of return of China’s high-speed rail network in 2015 was 8 percent, well above the opportunity cost of capital in China and most other countries.[8] However, it’s how China has pursued this strategy that is of legitimate concern for both its trading partners and foreign firms dedicated to competing based on innovation.

As CRRC became larger and more technologically advanced—on the back of foreign technology and know-how—China adapted its domestic restrictions to grow market share for local firms and technology. Foreign rail firms were largely restricted to providing components (also via forced JVs) as part of a shrinking market as China pursued ever-expanding control of technology throughout the sector, strategically picking and supporting local firms to provide copycat replacements for foreign technology, especially through ever-more-restrictive local procurement criteria. For example, in its 2020 World Rail Market Study—the only global assessment of the sector—the European rail industry association UNIFE (Union des Industries Ferroviaires Européennes) regarded the Chinese market as having been only 17 percent accessible for the period of 2017–2019, down 70 percent from 63 percent for 2009–2011. For comparison, the current accessibility rate in the European market is 79 percent.[9]

China pursues mercantilism despite having the financial resources to abide by the rules and norms of win-win global trade and innovation.

China goes far beyond the supportive industrial policies used in other countries, such as through tax and R&D policies. Its impact on the global high-speed rail market is unique due to the size and scale of its planning and financing, the importance of its domestic procurement market for global high-speed and general rail products, of its being on both sides of many projects (in terms of state-owned enterprises (SOEs)bidding for government contracts), and its willingness to use unfair and discriminatory rules to support local firms and technology. China pursues mercantilism despite having the financial resources to abide by the rules and norms of win-win global trade and innovation. It does this as it is guided by a different overarching goal: to control technologies in sectors it identifies as strategic, such as high-speed rail.

High-speed rail technology is extremely complex and generally takes a long time to master. The railway sector is like other innovation-driven sectors in that it involves high fixed costs and capital intensity, and, for the high-speed rail segment, is driven by the need for constant innovation, rather than focused on the marginal costs of its current products. In Europe, the railway supply industry (firms that sell trains and equipment to rail service companies) invests about 3 percent of sales in R&D, but high-speed rail firms typically invest between 5 and 10 percent.[10] The manufacture of locomotives and rolling stock(i.e., railway vehicles, including both powered and unpowered vehicles such as locomotives, railroad cars, coaches, and private railroad cars and wagons) is an IP-intensive industry.[11]

High-speed rail represents an innovation-driven industry given the need for faster, safer, quieter, smoother, and more environmentally friendly trains, train networks, and services. Firms continue to invest in the many technologies involved in wheel-based fast trains, as well as in train networks and the elusive potential of maglev trains (see box 1). It also involves the drive for innovation in the broader manufacture of locomotives and rolling stock.[12] Innovation in the high-speed rail sector is both supply and demand driven. In project tenders, the rail operators define performance requirements and the industry competes to offer the best products, which usually entails integrating the most cost-effective and innovative technologies. This involves both the main rail system integrator (e.g., Alstom, CRRC, Siemens, etc.) and the many component suppliers in the supply chain. It can also be a vertical process wherein the lead company asks its suppliers for a specific output, or a bottom-up process wherein a component is designed or improved by a component supplier.[13]

Technological innovation encompasses all elements of a high-speed train system beyond just the engine and cars: platforms, bridges and tunnels, track and power supply, train and network management and signaling systems, and after-sales and maintenance services. For example, achieving ever-greater speed gets exponentially more difficult and expensive.[14] These trains need the electricity to provide the power and the motors to cope with it. Power is typically supplied by overhead wires (around 15,000 to 25,000 volts) trains make contact with via a raised arm called a pantograph. However, these wires are not rigid, but draped, as trains passing underneath distort the shape of the wire and the whole frame holding the wires. Therefore, there is significant technology that goes into just keeping the pantograph in contact with the wire. A great deal of innovation also goes into designing the bogies that house the wheels, axles, transmissions, suspension, and braking devices (whether disc or magnetic) to provide a smooth, high-speed, and quiet ride.[15] The entire operating system is supported by sophisticated on-board diagnostic and control systems.

Data and digital technologies will play an increasingly important role in helping rail meet the rising demand for safe, reliable, convenient, and environmentally friendly transport at affordable prices. Digital technologies in high-speed rail affect both the consumer end of the sector and the production and after-sales service of rail equipment. Automation, big data, and the digital transformation of the supply chain are transforming manufacturing. For example, Siemens, GE, and others are deploying 3D printing technology for rail products.[16] Digital control and signaling systems greatly enhance the reliability and performance of operations, thus eliminating the need for outdated railway signal boxes and wiring. AI-driven enterprise asset management systems make for more efficient dispatching, routing, and maintenance scheduling.[17]

Advances in automation, self-diagnosis, and real-time geolocation tracking mean trains are becoming smarter and safer. Internet of Things sensors and devices are opening new possibilities for obstacle and damage detection, preventative maintenance, and linkages with other systems, logistics agencies, and government regulators. Such smart monitoring and surveillance systems are changing the way operators manage hazards, intrusions, railway crossings, and driver behavior.[18] The digitalization of rail allows for easier integration into other sectors and initiatives, such as smart cities and a flexible, green smart grid.[19]

High-speed rail firms also innovate through new business models, such as mobility as a service, that allow the use of a single application to provide passengers with access to multiple types of transport, all via a single payment. For example, Siemens’s high-speed rail line between Madrid and Barcelona is its flagship mobility-as-a-service package, as it sells predictable, affordable, and efficient transport availability (e.g., 99 percent availability), rather than just the train hardware. Siemens provides the digital services as part of a 20-year service contract for the project. However, this business model and these value-added services only work if Siemens has its hardware in place, as third-party platforms have different data protocols.[20]

Box 1: Future Innovation: Maglev

The use of magnetic levitation—known as maglev—to propel vehicles is part of the race to develop the next generation of technology that will define and supersede the current symbol of high-speed trains: Japan’s bullet trains (Shinkansen). It is mainly a Sino-Japanese battle for tech supremacy—and national pride is not an insignificant part of this contest.

With maglev, a vehicle is levitated a short distance from a guideway using magnets to create both lift and thrust. The technology goes back to 1912, when Emile Bachelet invented a magnetically levitating display model.[21] The magnets used are cooled by liquid helium or nitrogen, whose lack of friction means faster speeds and lower noise than wheeled transport. High-speed maglev trains could fill the gap between jet passenger planes (around 800 kph) and conventional bullet trains (around 350 kph). Keeping a floating train at the right distance from the track is very challenging, requiring extremely sensitive controllers to quickly adjust the magnetic field if the train moves too far from, or too close to, the track. When travelling at 600 kph, the time it takes for devices to detect and adjust the deviation on a maglev train is about one-thousandth of a second.

Beyond the challenge of developing the requisite technology, there is considerable uncertainty about the safety of high-speed maglev trains lines. And the most common argument levelled against maglev has always been cost—estimated to be about 1.5 times greater than conventional bullet trains—given projects are required to start from scratch because they cannot be integrated into a standard rail infrastructure.[22] Meanwhile, proponents of maglev technology contend that the key to affordability is the use of small, light-weight vehicles that can operate on less-expensive guideways and thus require less power for propulsion.[23]

The race to develop a commercial maglev network is not new.[24] Maglev technology has not become commonplace, in spite of its European and Japanese beginnings. Germany and Japan began conducting maglev R&D in the late 1960s and 1970s. Japan has since developed multiple test tracks, which it has gradually lengthened as part of ongoing testing and development.[25] Japan has a limited low-speed maglev rail network—the Linimo Line, which was made for the World Expo 2005—which runs at 100 kph.[26] Japan has since budgeted tens of billions of dollars to build the Chuo Shinkansen maglev line to cover the 178 miles between Tokyo and Nagoya. It will use cryogenically cooled superconducting magnets to levitate trains that run at speeds of up to 500 kmh. Early tests have shown the train could reach speeds over 600 kmh. It’s targeted to start operations in 2027.[27]

In April 2020, Hitachi unveiled the latest prototype Series L0 for this line, which offers 13 percent less air resistance than the previous prototype. That older prototype used gas turbine generators to power lighting and air-conditioning, while the newer design uses a wireless connection to the ground supply.[28] Germany’s first maglev train was used for an international fare in Hamburg in 1979. The country then began developing a maglev line for use to and from Munich airport, until an accident in 2006 during a test killed 23 people.[29] South Korea’s first maglev line, linking Incheon International Airport to Seoul, opened in 2016. Meanwhile, the United Kingdom operated the first commercial maglev train—the Birmingham airlink shuttle—which ran from 1984 to 1995. This is indicative of how hard it has been to develop maglev technology beyond its limited use as a demonstrative, futuristic technology.

China has firmly set its sights on leading the development and deployment of maglev technology. The Ministry of Science and Technology’s Advanced Rail Transit program (initiated in 2016) includes a goal to develop a 600 kph high-speed maglev transportation system. In 2019, high-speed maglev was included as a frontier key technology in China's “Outline for the Construction of a Powerful Country” and a government whitepaper, “Outline for Building China’s Strength in Transport,” includes an entire chapter on the development of new maglev lines between its key urban hubs.[30] China aims to put a 500 km-long high-speed maglev line into commercial use by 2025. But like every other country, China needs to do a lot more testing and then planning and development for the broader use of the technology before it is ready for network-scale commercial operations. However, experts have argued that China’s maglev technology remains immature and that its one operating high-speed maglev project—the Shanghai airport line—is a financial black hole.[31]

There are many technological issues to overcome to develop and deploy high-speed maglev trains as part of an integrated transport system. There is also the overarching question as to whether there is an ideal distance and market that can leverage maglev’s higher speeds at an affordable price (as compared with planes and rail-bound high-speed trains). At the moment, China’s government is betting that it can do both as it throws significant financial resources and policy support behind its firms to make maglev trains happen.

Launched in 2004, China’s only commercial, high-speed maglev service runs the 19 miles between Shanghai and Pudong International Airport, at 300 kph. However, it’s based on foreign technology, as Siemens Transportation Systems Group built the propulsion, control, and safety systems, and ThyssenKrupp Transrapid built the vehicles and motors. With about 10,000 passengers per day, the line likely runs at a significant loss, given it cost about $1.7 billion to build.[32] Supporters of greater maglev network investment point to Shanghai’s maglev train, which has operated over 100 trips a day for almost 15 years. But it is also a JV, so China does not control the underlying technology—which is explicitly what China wants to do when it deploys maglev trains at home, and no doubt, eventually overseas.[33]

Beyond this, China has several medium- and low-speed maglev trains working or planned. In 2016, it built an 18.6 km maglev line linking Changsha with Huanghua International Airport (running at 100 kph).[34] In 2018, it built a 9 km elevated maglev line serving the western part of Beijing.[35] A maglev line in Qingyuan, Guangdong Province, is due to open this year.[36] Chinese state media has reported that China is planning to develop maglev lines between Hangzhou and Shanghai, Guangzhou and Shenzhen, and Chengdu and Chongqing. In addition to the Qingyuan line, a Fenghuang County (Hunan) line will run short-distance, low-speed maglev trains that will also be operational by 2021.[37] China seems set on using foreign IP in maglev development, much as it did with wheel-based technology. In January 2021, Southwest Jiaotong University, China Railway Group, and CRRC unveiled a maglev test track in Chengdu that is based on technology Siemens and ThyssenKrupp developed for the Shanghai airport maglev track. Yet, again, this prototype track allegedly uses domestically developed technology.[38]

CRRC is developing the levitation and guidance system, the speed and location-detection system, as well as the broader control system for many of China’s maglev prototypes. According to CRRC, by the end of 2020, it was to have made five high-speed maglev test vehicles. It is currently also working on building an integrated engineering system for the maglev system.[39] Yet, recent maglev projects show that it still needs foreign technology and know-how. In June 2020, Chinese media reported the test of a new maglev vehicle—designed to travel at 600 kph—on a 1.5 km test track in Shanghai.[40] The $1.3 billion project was jointly developed by Shanghai Maglev Transport Development Ltd. and a German consortium consisting of Siemens, Thyssen Transrapid, and Transrapid International.

But indicative of the shortfalls in China’s propensity to create industrial overcapacity through its state-directed approach to industrial development, in 2018, Beijing ordered CRRC to halt the development of maglev production plants as part of broader orders to stop local governments from building excessive local transit projects that drive up debt and create overcapacity in industrial production. For example, CRRC’s Changsha factory was expected to produce 60 maglev trains a year once completed, which is obviously much more than the global market could actually currently support.[41]

The Competition Between China, the EU, Japan, and the United States for Global Rail Production and Exports

The global rail industry has changed significantly over the last two decades. This section details how China and CRRC’s emergence as major producers and exporters has changed the global market, and how this compares with European, Japanese, and U.S. firms and high-speed rail developments. It’s important to note that the focus of this report, high-speed rail, is a proxy for the broader rail sector—which provides the foundation the major rail firms innovate and compete on. The broad rail sector includes light, metro, and regional passenger trains and freight trains. This report therefore indirectly relates to the full range of component suppliers to these various rail market segments—all of which are affected by China’s mercantilist approach to high-speed rail.

Market Size and Shares

The global high-speed rail market is relatively concentrated and only involves a few dozen countries. China, Denmark, France, Germany, Italy, Japan, Morocco, Saudi Arabia, South Korea, Spain, Switzerland, Taiwan, Turkey, and the United Kingdom all have high-speed railways.[42] Parts of the United States’ “Northeast Corridor” between Washington DC, New York, and Boston operate at high speed. There are also high-speed lines in development in California, Florida, Nevada, and Texas.[43] Several developing countries have started or are considering initiating high-speed rail projects, including Egypt, India, Indonesia, Laos, and Thailand.[44] In 2020, China represented more than two-thirds (68 percent) of the world’s high-speed rail network, with 35,740 km in operation. The global total is an estimated 52,000 km, out of which 10,766 km are in Europe, 1,043 km are in the Middle East, and 735 km are in North America.[45] Similarly, out of approximately 6,000 high-speed trainsets, about two-thirds are in Asia and one-third is in Europe.[46]

Based on firm and industry estimates (and limited public data), we determined that annual revenues for the high-speed rail rolling stock market (i.e., railway vehicles) were $8 billion to $9 billion annually for 2015 to 2017, and $10 billion to $11 billion for 2017 to 2019.[47] China accounted for the vast majority of this global market, estimated at around 72 percent for 2015 to 2017 and 75 percent for 2017 to 2019. Europe accounted for the majority of the remaining market share.

CRRC has the largest share of the global high-speed rail market due to its dominance of the Chinese market. It has accounted for two-thirds to three-quarters of all deliveries in the market over the last decade.[48] Alstom’s, Hitachi’s, Kawasaki’s, and Siemens’s market shares are largely due to projects in their respective home markets, and in a small number of cases, export orders. However, they have each lost relative and absolute market share as a result of mostly missing out on the large and fast-growing Chinese market. Given this shift, Alstom’s, Hitachi’s, and Kawasaki’s market shares dropped from around 20 percent each between 2007 and 2009 (when China’s first high-speed line went into operation) to less than 10 percent each from 2015 to 2020. Meanwhile, Siemens lost both absolute and relative market share during the same timeframe.

There are only ever a few high-speed rail projects in the global market at any one time. This is why it’s critically important to ensure each of these is fair and open and only involves firms that are market driven instead of state driven.

Media reports provide supporting data for the impact of China’s strategy, CRRC’s emergence, and the waning fortunes of foreign firms.[49] In 2002, China reportedly invested nearly $6.3 billion in the high-speed market—for carriages, signaling equipment, and other high-tech track components—in which foreign companies competed and captured about 70 percent. In 2010, China invested an estimated $23 billion in the segment, of which foreign companies only accounted for an estimated 15 to 20 percent and earned nor more than they had in 2002.[50] At that time, foreign multinationals were still importing the most-sophisticated components, such as traction motors and traffic-signaling systems, but these components accounted for less than 20 percent of China’s then-high-speed rail market.[51] More recently, (with rare exceptions) foreign firms have stated that China’s high-speed rail market has been effectively closed to them for most of the last decade.

The global high-speed rail market will continue to grow, albeit at a slower pace, as compared with the dramatic China-driven growth between 2010 and 2020. The World Rail Market Study estimates average growth of 2.7 percent worldwide for the 2021–2023 period.[52] To make matters worse, global market access (as defined by the World Rail Market Study) has been decreasing over time, aggravated by rising protectionism in China (and elsewhere).[53] In 2020, there were an estimated 11,000 km of high-speed lines under construction, of which around half were in China.[54]

The global high-speed rail market is characterized by a few infrequent but large government procurement projects being open for bids and in construction at any one time, in a relatively small number of countries. Since 2008, there have been many high-speed rail projects in China (and to a far lesser extent, Japan and South Korea), but only 19 (contestable) tenders elsewhere, of which 11 were in Europe.[55] Leading high-speed rail firms feel compelled to bid on every one of the few high-speed rail projects, thus each is critically important in providing economies of scale for the large investments in production and R&D involved in high-speed rail products. This is why it’s critically important to ensure each of these is fair and open and only involves firms that are market driven instead of state driven.

While Europe remains a major market and continues to expand its high-speed rail network, it faces many challenges. A 2018 audit of the EU’s network was highly critical. It did not think that the European Commission’s long-term plan to triple the length of high-speed rail lines—from 9,700 km in 2008 to 30,750 km by 2030—was supported by credible analysis or resources.[56] It also stated that, in reality, there was no European high-speed rail network, but rather an ineffective patchwork of national lines. It pointed out that the European Commission lacked the legal tools and powers to force EU member states to build an integrated high-speed rail network.[57] Even on its high-speed lines, the maximum speeds (300 kph) are never reached in practice: Of the lines audited, trains ran on average at only around 45 percent of the line’s design speed and only two lines operated at an average speed above 200 kph, and none above 250 kph.[58]

Sector-level data provides a broad snapshot of production and export changes in the high-speed rail segment—but it obviously also includes other rail segments. While not specific to the high-speed rail segment, changes in the broader sector still reflect China’s growth as the world’s largest producer and market. In 2000, EU rail sector production was more than double the next-highest producer (the United States) and more than three times Chinese production (see figure 1).[59] But as China ramped up its rail and high-speed rail system and required domestic production, Chinese production rapidly increased and overtook EU production in 2009. In 2017, Chinese production was nearly twice that of EU production (and nearly 6 times as large as U.S. production).

Figure 1: Rail supply industry production (locomotives and rolling stock, major global economies active in the sector, fixed 2017 ex rates)[60]