Will China Invest Reserves in U.S. High-Speed Rail?

The China Investment Corporation (CIC) is now considering investing in the US high-speed rail sector, China's official Shanghai Securities News reported Jan. 13. The CIC was set up in 2007 to improve the investment of China's huge foreign exchange reserves, now at $2.27 trillion; CIC currently holds almost $300 billion. After having big losses from investments in Blackstone Group and Morgan Stanley, in 2009 CIC shifted towards energy, infrastructure, and raw materials. The fund wants to expand in 2010.

When President Obama went to China Nov. 16-18, the Joint Statement he signed with President Hu Jintao in Beijing made a brief reference to high-speed rail, saying that "the two sides welcomed cooperation by public and private bodies on the development of high speed railway infrastructure." There was nothing more concrete agreed to at the time, although this may have changed.

There has been at least one big rail agreement, private on the U.S. side: on Nov. 17, General Electric and the Chinese Rail Ministry signed a Memo of Understanding to "jointly pursue high-speed rail projects in the United States." Both sides want to develop high-speed rail technology more rapidly and broadly, GE announced, and will spend over $13 billion in the next five years for this. At first, GE will produce advanced diesel engines in China, and this cooperation will lead to cooperation with China in more advanced high-speed rail technology, where China is taking world leadership. "A successful partnership with [China's Ministry of Railways] would allow GE to more effectively compete against European and Japanese companies for high-speed rail related opportunities," GE announced at the time.

It is also notable, that when Canadian Prime Minister Stephen Harper was in Bejing Dec. 4 — the first such visit in years — there was also discussion of infrastructure development. Harper said that Canada is investing over $1 billion into its Asia-Pacific Gateway, an integrated system of ports, airports, road and rail connections to "link Asia deep into the heart of the North American marketplace," China Daily reported.