No way will we sell the shinkansen to Beijing

Tomohiko Taniguchi (Editor-at-Large, Nikkei Business Publications, Inc.)

Yoshiyuki Kasai, President of Central Japan Railway Company (JR Tokai), repeatedly affirms that Beijing cannot expect a deal. "We will not sell our shinkansen technologies to mainland China, full stop", Mr. Kasai states.

Selling the bullet train technologies to China is of course about commerce. But many other factors affect the decision. Firstly it is about international competition. The Germans with the magnetic levitation ("maglev", otherwise known as "linear-motor car") system and the French with their own high-speed train are both arm-twisting Chinese officials. Japan lost a huge bid against the Europeans when the Chinese set in motion the construction of Three Gorges Dam. Does it have to endure a similar fate yet again? So secondly it is about national pride, all the more so for Japan takes enormous pride in its shinkansen, which has been in operation for almost 40 years with an unblemished track record.

Why then does JR Tokai seem not only uninterested in but also opposed to making a deal with the Chinese?

The first answer lies in technologies. The Chinese are in fact not proposing to buy a "turn-key" system in its entirety. They are likely to buy railway infrastructure from one party and rolling stock from another, bit by bit, so they can command control of the overall technologies. This makes the system unnecessarily complicated, thereby increasing the potential risks. And when they talk of risks, it means serious risks, involving financial losses and human casualties that could both be massive.

Those nations that have recently tried to build high-speed railways hastily with borrowed technologies have all failed without exception. The Shanghai government started to test-run the German maglev a year ago, aiming to link its financial district and airport. However, it cannot set the official launch date as yet because the system turned so unreliable. The Koreans nearly gave up the idea of linking Pusang and Seoul. The Germans laugh among themselves as their new train operates only at 60 % punctuality. The Spanish "high-speed" train runs only at 200 km/h, not 350 as initially designed. And in the US, Amtrak is busy suing a rolling stock company as their own bullet train has never run. All this evinces that in the words of Amtrak president "it is normal for new equipment to have break-in problems".

A train system, as it involves a variety of diverse technologies, is as complex as a space shuttle. It is like a box of apples: if one apple is rotten, the entire box will be affected. "That is exactly the reason why", JR Tokai's technology tsar Hiromasa Tanaka asserts, "We had better distance ourselves as far as we can from risks". Were it a turn-key project where Mr. Tanaka and his company could do everything from scratch, it would make the system simpler, and the business equation would justify taking risks, be they financial, legal, or even human. Yet for the mainland communists the project to connect Beijing and Shanghai via high-speed train by the Beijing Olympics year of 2008 is essentially a show of self-esteem, much like launching a human into space. There is absolutely no likelihood that they will allow the Japanese to yet again "colonise" their central blood vessel.

So inside Beijing, the issue is also about intra-party politics. The new faction, led by Hu Jintao, is pro-Japanese, well, sort-of, whereas Jiang Zemin's remains anti, it must be said. Even if the former prevails in the end to give a bid to the Japanese, it will do so only after saving the face of the latter, the consequence of which will be a project with a miserably reduced price tag, analysts argue. Then there will be so little reward that it will make no economic sense for Japan to sell the technologies and face the potential risks.

At the final analysis, Mr. Kasai is not a Sinophobe. He is merely a businessman.