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China Defends High-Speed Rail Plan Beijing Dismisses Worries About Technology Transfers, as World Bank Praises Its Expansion Goals and Warns of Costs From the WSJ, JULY 29, 2010; By SHAI OSTER

A maintenance facility for high-speed trains in Wuhan, in central China's Hubei province.. BEIJING—China's powerful Ministry of Railways dismissed foreign concerns about the transfer of technology from foreign companies participating in its enormous high-speed rail building binge, saying the country doesn't force such transfers and that it is developing its own technology. The comments Wednesday, by a senior official during a rare news conference by the normally secretive ministry, came as the World Bank issued a report praising China's high-speed rail plans but also warning that they will be difficult to pay for. China plans to spend some two trillion yuan, or around $295 billion, by 2020 to build a high-speed rail network totaling 16,000 kilometers (10,000 miles) that connects all its major cities. The World Bank report called the project, begun in 2007, "perhaps the biggest single planned program of passenger-rail investment there has ever been in one country," and said it could help China's economy grow by speeding up passenger traffic, freeing up overloaded freight routes and reducing dependency on automobiles.

China's rail plans have meant billions of dollars of contracts for foreign companies such as Bombardier Inc., Siemens AG, and Alstom SA. But foreign companies were allowed to enter China's market only as joint-venture partners after China abandoned efforts to develop its own independent super-fast trains in 2003, and foreign executives say their companies were required to transfer technology as part of those ventures in order to gain market access. Some foreign executives say China's new homemade high-speed trains, among the fastest in the world, have borrowed heavily from foreign technology. He Huawu, chief engineer at the Ministry of Railways, acknowledged at Wednesday's news conference that China's trains are based on foreign technology, but said they had been greatly modified by Chinese engineers to increase speeds from 200 kilometers an hour to 350 kilometers and hour. Calling China's policies "forced" technology transfer "is inaccurate," Mr. He said. "Indeed, China applied the results of world-wide human development of high-speed railways," Mr. He said. "We did lots of innovation and improvement, and this product can also be shared with the world." He said China chose to "first introduce technology from abroad, produce in joint ventures, and then develop Chinese brands." Foreign executives and analysts have raised particular concerns about the technology transfers because they fear the transfers could be helping Chinese rivals develop into global competitors. Mr. He said the Ministry of Railways is looking at projects in Russia, Brazil, the U.S., Myanmar and Laos, among others. The World Bank's report noted that the "transfer of technology and know-how, together with the experience of building and operating several thousand route-kilometers of high-speed railway, will make China's one of the most advanced railway industries in the world. This should position the country to compete internationally when other countries adopt high-speed railways." The World Bank report, while lauding the benefits of China's high-speed rail plan for its economy, warned that in the past, such trains have struggled to pay off their high construction bills because steep ticket prices kept passenger volumes below forecasts. China's densely urban corridors could be better suited for the fast trains, but "even in China, the sustainability of railway debt arising from the program as it proceeds will need to be closely monitored and payback periods will not be short," the report said. —Sue Feng contributed to this article