Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Massive Stock Market Price Reversion May Be Days or Weeks Away - 22nd Sep 19
How Russia Seized Control of the Uranium Market - 22nd Sep 19
Dow Stock Market Trend Forecast Update - 21st Sep 19
Is Stock Market Price Revaluation Event About To Happen? - 21st Sep 19
Gold Leads, Will the Rest Follow? - 21st Sep 19
Are Cowboys Really Dreaming of... Electric Trucks? - 21st Sep 19
Gold among Negative-Yielding Bonds - 20th Sep 19
Panicky Fed Flooding Overnight Markets with Cash - 20th Sep 19
Uber Stock Price Will Crash on November 6 - 20th Sep 19
Semiconductor Stocks Sector Market & Economic Leader - 20th Sep 19
Learning Artificial Intelligence - What is a Neural Network? - 20th Sep 19
Precious Metals Setting Up Another Momentum Base/Bottom - 20th Sep 19
Small Marketing Budget? No Problem! - 20th Sep 19
The Many Forex Trading Opportunities the Fed Day Has Dealt Us - 19th Sep 19
Fed Cuts Interest Rates and Gold Drops. Again - 19th Sep 19
Silver Still Cheap Relative to Gold, Trend Forecast Update Video - 19th Sep 19
Baby Boomers Are the Worst Investors in the World - 19th Sep 19
Your $1,229 FREE Tticket to Elliott Market Analysis & Trading Set-ups - 19th Sep 19
Is The Stock Market Other Shoe About To Drop With Fed News? - 19th Sep 19
Bitcoin Price 2019 Trend Current State - 18th Sep 19
No More Realtors… These Start-ups Will Buy Your House in Less than 20 Days - 18th Sep 19
Gold Bugs And Manipulation Theorists Unite – Another “Manipulation” Indictment - 18th Sep 19
Central Bankers' Desperate Grab for Power - 18th Sep 19
Oil Shock! Will War Drums, Inflation Fears Ignite Gold and Silver Markets? - 18th Sep 19
Importance Of Internal Rate Of Return For A Business - 18th Sep 19
Gold Bull Market Ultimate Upside Target - 17th Sep 19
Gold Spikes on the Saudi Oil Attacks: Can It Last? - 17th Sep 19
Stock Market VIX To Begin A New Uptrend and What it Means - 17th Sep 19
Philippines, China and US: Joint Exploration Vs Rearmament and Nuclear Weapons - 17th Sep 19
What Are The Real Upside Targets For Crude Oil Price Post Drone Attack? - 17th Sep 19
Curse of Technology Weapons - 17th Sep 19
Media Hypes Recession Whilst Trump Proposes a Tax on Savings - 17th Sep 19
Understanding Ways To Stretch Your Investments Further - 17th Sep 19
Trading Natural Gas As The Season Changes - 16th Sep 19
Cameco Crash, Uranium Sector Won’t Catch a break - 16th Sep 19
These Indicators Point to an Early 2020 Economic Downturn - 16th Sep 19
Gold When Global Insanity Prevails - 16th Sep 19
Stock Market Looking Toppy - 16th Sep 19
Is the Stocks Bull Market Nearing an End? - 16th Sep 19
US Stock Market Indexes Continue to Rally Within A Defined Range - 16th Sep 19
What If Gold Is NOT In A New Bull Market? - 16th Sep 19
A History Lesson For Pundits Who Don’t Believe Stocks Are Overvalued - 16th Sep 19
The Disconnect Between Millennials and Real Estate - 16th Sep 19
Tech Giants Will Crash in the Next Stock Market Downturn - 15th Sep 19
Will Draghi’s Swan Song Revive the Eurozone? And Gold? - 15th Sep 19
The Race to Depreciate Fiat Currencies Is Accelerating - 15th Sep 19
Can Crypto casino beat Hybrid casino - 15th Sep 19
British Pound GBP vs Brexit Chaos Timeline - 14th Sep 19
Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - 14th Sep 19
War Gaming the US-China Trade War - 14th Sep 19
Buying a Budgie, Parakeet for the First Time from a Pet Shop - Jollyes UK - 14th Sep 19
Crude Oil Price Setting Up For A Downside Price Rotation - 13th Sep 19
A “Looming” Recession Is a Gold Golden Opportunity - 13th Sep 19
Is 2019 Similar to 2007? What Does It Mean For Gold? - 13th Sep 19
How Did the Philippines Establish Itself as a World Leader in Call Centre Outsourcing? - 13th Sep 19
UK General Election Forecast 2019 - Betting Market Odds - 13th Sep 19
Energy Sector Reaches Key Low Point – Start Looking For The Next Move - 13th Sep 19
Weakening Shale Productivity "VERY Bullish" For Oil Prices - 13th Sep 19
Stock Market Dow to 38,000 by 2022 - 13th Sep 19 - readtheticker
Gold under NIRP? | Negative Interest Rates vs Bullion - 12th Sep 19
Land Rover Discovery Sport Brake Pads and Discs's Replace, Dealer Check and Cost - 12th Sep 19
Stock Market Crash Black Swan Event Set Up Sept 12th? - 12th Sep 19
Increased Pension Liabilities During the Coming Stock Market Crash - 12th Sep 19
Gold at Support: the Upcoming Move - 12th Sep 19
Precious Metals, US Dollar, Stocks – How It All Relates – Part II - 12th Sep 19

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

How to Profit From China's High Speed Rail Infrastructure Projects

Stock-Markets / China Stocks Aug 17, 2009 - 07:42 PM GMT

By: Money_Morning

Stock-Markets

Best Financial Markets Analysis ArticleJason Simpkins writes: Understanding that high-speed rail (HSR) could provide millions of Americans with a cleaner, more efficient way to travel, President Barack Obama allocated $13 billion to its development over the next five years as part of the American Recovery and Reinvestment Act (ARRA) passed in February.


But Obama's high-speed rail initiative has gotten off to a sluggish start, while a much bigger, $300 billion plan to create the world's largest and most sophisticated high-speed rail network is already rapidly unfolding in China.

"Railroads were always the pride of America, and stitched us together. Now Japan, China, all of Europe have high-speed rail systems that put ours to shame," Obama said in April.

In a proposal called "A  Vision  for  High-Speed  Rail  in  America" Obama and the Federal Railroad Administration outlined a plan to develop 10 "potential" 100-600 mile corridors in the United States, "similar to how interstate highways and the U.S. aviation system were developed in the 20th century."

Developing all 10 high-speed corridors could eliminate 6 billion pounds, or about 3 million tons, of greenhouse gas emissions each year, the FRA said.

But the plan was pitched as more than a way to make travel cleaner and more efficient. It was touted as a way of creating jobs. In April, when Obama gave his speech, the unemployment rate stood at 8.9%. It's since risen to 9.4% in July and will likely test 10% by the end of the year. 

Meanwhile, the FRA has until 2012 to disperse the first $8 billion of the total $13 billion allocated to high-speed rail. And when that money is finally paid out, it's more likely to go towards upgrading existing infrastructure than laying new high-speed rail.

"No one expects we are going to begin, let alone complete, the high-speed rail system with $8 billion," FRA spokesman Warren Flatau told CNNMoney. But the stimulus funds represent the "groundwork for a more sustainable program of funding in the future."

The remaining $5 billion has been included in the president's budget over the next five years.

Already, it that amount seems to be woefully inadequate. Last month, more than 40 states submitted 278 pre-applications for stimulus-funded high-speed rail projects. The total amount of funds requested amounted to $102.5 billion in requests, according to CNN.

China Fast-Tracks High Speed Investment

High-speed rail may be on its way to the United States but it's already arrived in China.

China introduced a 270mph maglev train service in March 2004 and regular high-speed train services in April 2007. But it's not stopping there.

Beijing will spend $50 billion on high-speed rail this year alone, and the central government plans to spend another $250 billion over the next decade. By 2020, China will have laid nearly 16,000 miles of high-speed track capable of carrying the fastest trains on the planet. By comparison, America has just 457 miles of high-speed track.

And unlike in the United States, China's high-speed railroad initiative is already producing jobs. So far, the construction of the Beijing-Shanghai high-speed route alone has created about 110,000 jobs and is playing an enormous part in China's economic recovery.  

Spending on railways jumped 126.5% year-over-year in the first half of 2009, leading to a huge increase in the nation's steel production at a time when global demand was decidedly weak. China's crude steel output in July reached a record 50.68 million metric tons, up 12.6% compared with last year, according to figures from the National Bureau of Statistics.

There is no doubt that "the acceleration of [the massive railroad build-out is playing a key role in China's recovery," David Li, an economist at Beijing's Tsinghua University told Fortune.

Liang Yi, the vice CEO of the China Railway Construction Co. (CRCC) subsidiary working on the Beijing-Shanghai route told Fortune that his company may hire up to 20,000 new university grads to meet the growing workload. Liang said his unit alone is absorbing 8,000 more workers this year than it did last.

Of course, that doesn't mean Chinese companies are the only ones profiting from China's railroad expansion.

International Business Machines Corp. (NYSE: IBM) won a contract to provide software for high-speed trains the Guangdong province. Also, IBM last month announced that it was opening a "Global Rail Innovation Center" in Beijing.

"In the next five years, China is investing more in high speed rail than the rest of the world combined," Keith Dierkx, the director of this new center, told TheInfrastructurist.com. "This enormous build out of the HSR frees up their traditional rail network for freight. So, they'll have more high-speed rail than the rest of the world combined-but they'll also be getting better freight capacity."

Canada's Bombardier Inc., the world's largest rail equipment manufacturer, also got in on China's massive HSR initiative when it won a contract for work on 40 high-speed trains, as well as a signaling system.

Fortune estimates that foreign companies have won about $10 billion worth of contracts for work on China's high-speed rail system.

Still, Money Morning Investment Director Keith Fitz-Gerald believes that the best way to capitalize on China's massive rail build-out is by investing in Chinese companies that will have a long-term presence.

"There's certainly hay to be made on high-speed rail development in the United States, but if you really want to capitalize on this trend you should look at China, which accounts for 25% of the world's railroad traffic but has only 6% of the world's rails," Fitz-Gerald said. "To the extent that China builds high-speed rail, then effectively railroad companies across the country will benefit from increased traffic."

In a recent Money Morning Webinar, Fitz-Gerald named Guangshen Railway Co. (NYSE ADR: GSH) as company that has good long-term prospects in China's transportation sector.

"Guangshen is involved in high speed, it's involved in capacity and it's got relatively low debt," said Fitz-Gerald. "It's just another example of a Chinese company capitalizing on a huge infrastructure expansion that's backed by billions of dollars in government investment."

Guangshen's 2008 operating revenue jumped 11.23% in 2008, in part because of HSR development.

The $300 Trillion �Money Bang� Keith Fitz-Gerald and his team have just produced a groundbreaking report that shows how this historic �Money Bang� is gaining steam. You�ll find out why China is investing $200 billion in one company � and why it�s expected to gain 356%� Why the Dept. of Energy is �backing� one solar company � and why it�s 506% revenue jump is a �smidgen�� And why one recently IPO�d water company is headed for a 600% run. Just go here for details.

Money Morning/The Money Map Report

©2009 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules