In diverse fields -- trains and telecommunications -- we'll soon learn whether some of China's leading companies can win business on the global stage.
The next six months will test the power of China's global champions -- and their limitations on the world stage.
China's biggest companies
The ability of Japanese and European companies to beat Chinese upstarts on the relatively neutral ground of California would speak volumes about China's ability to win dominant positions in new global markets.
Second, the success -- or lack of success -- of Huawei, China's champion in the telecommunications gear industry, in breaking into the U.S. market will tell investors exactly how big a handicap the ties that bind China's biggest companies to the Chinese government and, in particular, the People's Liberation Army, will be as these companies try to move onto the global stage.Msn.Video.createWidget('PlayerAd1Container', 'PlayerAd', 300, 213, {"configCsid": "MSNmoney", "configName": "player-money-articles-16x9", "player.vcq": "videoByUuids.aspx?uuids=4d098f70-a8ce-4f1e-bdc1-5c6986498911,32325561-2f7e-4cd8-aac8-4b140b7c3c56,f7ef3e1a-5c6c-e97a-8531-afb5fc652063,976b4eee-cd15-6599-2de3-115375932bab,57e0013c-e1be-40a0-88a5-97530f0433ec,edbcd149-1254-47a5-9247-aba2910db3f4,fc0c5b0c-2eb6-42a1-9d57-fd36ab4ba1ca,d49641a2-bf32-452b-acc6-b32bfded809e,59bdbdac-23e7-9cd7-fc77-e929fba9bbd2,94e15091-5741-43d4-8727-df3fc366a407", "player.fr": "iv2_en-us_money_article_16x9-Investing-JubaksJournal"}, 'PlayerAd1');Msn.Video.createWidget('Gallery4Container', 'Gallery', 304, 150, {"configCsid": "MSNmoney", "configName": "gallery-money-articles", "gallery.linkbackLocation": "bottom_left", "gallery.numColsGrid": "3", "gallery.categoryRequests": "videoByUuids.aspx?uuids=4d098f70-a8ce-4f1e-bdc1-5c6986498911,32325561-2f7e-4cd8-aac8-4b140b7c3c56,f7ef3e1a-5c6c-e97a-8531-afb5fc652063,976b4eee-cd15-6599-2de3-115375932bab,57e0013c-e1be-40a0-88a5-97530f0433ec,edbcd149-1254-47a5-9247-aba2910db3f4,fc0c5b0c-2eb6-42a1-9d57-fd36ab4ba1ca,d49641a2-bf32-452b-acc6-b32bfded809e,59bdbdac-23e7-9cd7-fc77-e929fba9bbd2,94e15091-5741-43d4-8727-df3fc366a407;videoByTag.aspx%3Ftag%3Dmoney_dispatch%26ns%3DMSNmoney_Gallery%26mk%3Dus%26vs%3D1;videoByTag.aspx%3Ftag%3Dbest%2520of%2520money%26ns%3DMSNmoney_Gallery%26mk%3Dus%26vs%3D1"}, 'Gallery4');Between them, what happens with California's bullet train and Huawei's attempts to break into the U.S. market will show investors the lay of the competitive terrain as the next generation of corporate and government spending speeds up and the global economy returns to whatever "normal" is after the Great Recession.
Find a broker and start trading onlineThe Golden State prize Every manufacturer of high-speed trains in the world will take its best shot at winning in California. The state won the bulk of the $8 billion in grants for high-speed rail included in President Barack Obama's stimulus plan. With the U.S. the laggard among the world's big economies in building a network of high-speed trains, the California tender is seen, rightly or not, as the opening of a huge new market for rail equipment.
The competition would have been cut and dried 10 years ago. Two consortia -- one from Europe, the other from Japan -- would have gone head to head.
But in 2004, Japan's Kawasaki Heavy Industries (KWHIY, news, msgs) signed a $1.6 billion deal to supply 60 eight-car high-speed trains to China's national railroads with the Qingdao Sifang unit of Chinese partner China South Locomotive & Rolling Stock (CSRGY, news, msgs). The agreement included what other Japanese companies now condemn as a too-generous transfer of technology from Kawasaki to the Qingdao Sifang unit. Within two years, Qingdao Sifang says, it had absorbed Kawasaki's technology.
These days, the Chinese company is producing equipment that resembles the famous shape of Japan's Shinkansen bullet train but that the company says is built on totally Chinese technology. Whether that claim is true or not, China's high-speed rail companies are now the team to beat.
I outlined China's strategy in this March 24 post on my website: "The rise of the Chinese high-speed rail industry is built on China's creation of a huge market for rail equipment of all kinds -- everything from traditional rails to rolling stock to signaling equipment to high-speed equipment. China's market for all rail equipment, running at about $10 billion a year on average between 2004 and 2008, is projected to grow to more than $50 billion by 2013, according to McKinsey & Co. In 2010, China is projected to account for at least half of total global spending on rail equipment."
That huge domestic market, largely protected from competition, is the base that China's rail companies are now using to bid for -- and win -- high-speed rail projects in Brazil, in Saudi Arabia and across Southeast Asia.
Japan's companies, in contrast, seem to have fallen asleep at the switch. In early July, Akihiko Tamura, the assistant vice minister for international affairs in Japan's Ministry of Transport, told Bloomberg that Japan should consider setting up a consulting company like France's Systra to help it compete against Alstom.
Consider? To help compete against Alstom? It's a little late to be "considering," isn't it? And besides, France isn't the toughest competition anymore.
Continued: Will telecom connect?More from MSN Money and MoneyShow.com
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ReplyReport Abusedisillusioned101 #3Thursday, August 05, 2010 11:27:28 PM
You know many many moons ago a Japanese company offered to give (as in free) California (L.A. County) a magnetic lift train and six miles of track from Chatsworth to Warner Center to demonstrate how quiet they are. You know to calm down the NIMBY's. One of the county supervisors told them that he wasn't interested because he wanted to build subways in earth quake country because digging tunnels creates more Union jobs then erector set counter rotating monorails made in Japan that would have better served the needs of his constituents for a fraction of the cost. Upon hearing this the Japanese company withdrew the offer.
Even though the subway was a complete fiasco from a civil engineering point of view and they ran out of money without serving the needs of their Chatsworth/Warner Center constitutes. In stead of a automated rail system, they had to settle for buses which require Union drivers, Union wages, and Union retirement packages. Go figure. At least most of the money stayed local. I wish I could remember which local it was. lol
ReplyReport AbuseLost Dollar #4Friday, August 06, 2010 7:53:15 AMEureka.....I have connected the dots. Okay, Berkshire Hathaway acquired BNSF(Burlington Northern Railroad) in 2009. I checked the track routes and easements, and guess what....there is a line from Los Angeles to San Francisco. I figured Warren Buffett had a big picture of what he wanted to do other than ship Freight. Berkshire Hathaway will be given part of this upcoming Contract (in my opinion).ReplyReport AbuseLTE King #5Friday, August 06, 2010 8:55:54 AMSurvival of the fittest applies to everything. If US companies not able to produce products that pars with other foreign companies, then why buy them? I definitely hopes to see more job opportunities in US, but wasting money on overpaid union workers or purchasing sub par products doesn't make sense. I have personally see Huawei eating up telecommunication world like lotus. However, from operator's point of view, they are merely looking for company that offers products with best value. And you know Huawei has the R&D team working around the clock for any feature requests, which I don't think any other telecommunication company can compete with that. ReplyReport AbusesteveG1956 #6Friday, August 06, 2010 9:06:58 AMgreat! USA looses still more industry! that's what we need to do with our unemployed! send them to china! the low bidder always wins and who needs to have a job in usa anyway? ReplyReport Abusestressedandnothappy #7Friday, August 06, 2010 9:07:21 AMThis is just sickening. First, I read a few months back that a stimulus backed project for windmills had the main components coming from overseas when there was an american company that also built them - but instead of giving jobs to americans, nooooo - help out the chinese. Now this - OUR bailouts and stimulus - going to foreign economies ? That is sooo wrong on so many levels I can't even put words to it. ReplyReport AbusesteveG1956 #8Friday, August 06, 2010 9:45:12 AMimagine had we outsourced the moon race? we would have outsourced the huge return on that effort as well. i swear the moon race gave us the gains we enjoyed even to today. however now we're outsouring our children's futures.
make sure they learn how to speak chinese.... skip spanish.
This is just sickening. First, I read a few months back that a stimulus backed project for windmills had the main components coming from overseas when there was an american company that also built them - but instead of giving jobs to americans, nooooo - help out the chinese. Now this - OUR bailouts and stimulus - going to foreign economies ? That is sooo wrong on so many levels I can't even put words to it. ReplyReport AbuseMattinTO #9Friday, August 06, 2010 10:01:26 AMOf course in the narrow vision of this article he forgets to mention North America's own (Canada's specifically) rail system manufacturer Bombardier. They built the engines and cars for the long haul high seed rail across China into Tibet. Supplied product to the French, British and Brasilians, among others. Build state of the art high speed trains and do so right in our own back yard.
Naturally, with most US articles....they miss the obvious contenders.
ReplyReport Abusepink_panther #10Friday, August 06, 2010 10:44:02 AMCheap or not cheap. Enough with Made in China already! Why give business and support an enemy and a dictatorship. I would rather ride a camel from San Francisco to Los Angeles than ride on a Chinese train.ReplyReport Abuse1 - 10 of 12PreviousNext_ucf13('0'); _iuc2Om1('MSNPortalInlineComments','Initial_Load_Comment_View','http://articles.moneycentral.msn.com/Investing/JubaksJournal/2-tests-for-chinese-giants.aspx?','en-us');Are you sure you want to delete this comment?Report AbusePlease help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease notify us using the Report abuse form below. We will investigate your report and take appropriate action against offenders. We report all illegal activity to authorities.CategoriesSpam or advertisingChild pornography or exploitationProfanity, vulgarity or obscenityCopyright infringementHarassment or threatOtherAdditional comments(optional)100 character limit To add a comment, pleasesign in/*MSN PrivacyLegalAdvertiseRSSHelpFeedbackSite mapAbout our ads© 2010 Microsoft/*The Golden State prize Every manufacturer of high-speed trains in the world will take its best shot at winning in California. The state won the bulk of the $8 billion in grants for high-speed rail included in President Barack Obama's stimulus plan. With the U.S. the laggard among the world's big economies in building a network of high-speed trains, the California tender is seen, rightly or not, as the opening of a huge new market for rail equipment.
The competition would have been cut and dried 10 years ago. Two consortia -- one from Europe, the other from Japan -- would have gone head to head.
But in 2004, Japan's Kawasaki Heavy Industries (KWHIY, news, msgs) signed a $1.6 billion deal to supply 60 eight-car high-speed trains to China's national railroads with the Qingdao Sifang unit of Chinese partner China South Locomotive & Rolling Stock (CSRGY, news, msgs). The agreement included what other Japanese companies now condemn as a too-generous transfer of technology from Kawasaki to the Qingdao Sifang unit. Within two years, Qingdao Sifang says, it had absorbed Kawasaki's technology.
These days, the Chinese company is producing equipment that resembles the famous shape of Japan's Shinkansen bullet train but that the company says is built on totally Chinese technology. Whether that claim is true or not, China's high-speed rail companies are now the team to beat.
I outlined China's strategy in this March 24 post on my website: "The rise of the Chinese high-speed rail industry is built on China's creation of a huge market for rail equipment of all kinds -- everything from traditional rails to rolling stock to signaling equipment to high-speed equipment. China's market for all rail equipment, running at about $10 billion a year on average between 2004 and 2008, is projected to grow to more than $50 billion by 2013, according to McKinsey & Co. In 2010, China is projected to account for at least half of total global spending on rail equipment."
That huge domestic market, largely protected from competition, is the base that China's rail companies are now using to bid for -- and win -- high-speed rail projects in Brazil, in Saudi Arabia and across Southeast Asia.
Japan's companies, in contrast, seem to have fallen asleep at the switch. In early July, Akihiko Tamura, the assistant vice minister for international affairs in Japan's Ministry of Transport, told Bloomberg that Japan should consider setting up a consulting company like France's Systra to help it compete against Alstom.
Consider? To help compete against Alstom? It's a little late to be "considering," isn't it? And besides, France isn't the toughest competition anymore.
Continued: Will telecom connect?More from MSN Money and MoneyShow.com
1 | 2 | next >
Check out Jim's top stocks for the next 12 months.
Read how to invest with Jubak's showcase portfolio.
Follow the long-term portfolio from Jim's book "The Jubak Picks."
See Jim's new portfolio to help navigate the treacherous interest-rate environment.
Glade to hear the government is finally spending all that stimulus money. Too bad they are stimulating the wrong economy. Kind of working out like global trade. It sure created a lot of jobs somewhere, but not here.
You know many many moons ago a Japanese company offered to give (as in free) California (L.A. County) a magnetic lift train and six miles of track from Chatsworth to Warner Center to demonstrate how quiet they are. You know to calm down the NIMBY's. One of the county supervisors told them that he wasn't interested because he wanted to build subways in earth quake country because digging tunnels creates more Union jobs then erector set counter rotating monorails made in Japan that would have better served the needs of his constituents for a fraction of the cost. Upon hearing this the Japanese company withdrew the offer.
Even though the subway was a complete fiasco from a civil engineering point of view and they ran out of money without serving the needs of their Chatsworth/Warner Center constitutes. In stead of a automated rail system, they had to settle for buses which require Union drivers, Union wages, and Union retirement packages. Go figure. At least most of the money stayed local. I wish I could remember which local it was. lol
imagine had we outsourced the moon race? we would have outsourced the huge return on that effort as well. i swear the moon race gave us the gains we enjoyed even to today. however now we're outsouring our children's futures.
make sure they learn how to speak chinese.... skip spanish.
Of course in the narrow vision of this article he forgets to mention North America's own (Canada's specifically) rail system manufacturer Bombardier. They built the engines and cars for the long haul high seed rail across China into Tibet. Supplied product to the French, British and Brasilians, among others. Build state of the art high speed trains and do so right in our own back yard.
Naturally, with most US articles....they miss the obvious contenders.
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