China Railway Group to sign $390 million Russian contract

China Railway Group Ltd expects to sign the country's first overseas high-speed railway contract by the end of May. This will pave the way for Chinese construction and rolling stock companies to bid for follow-up projects.

A consortium, comprising of China Railway Eryuan Engineering Group Co Ltd, a subsidiary of China Railway, and two Russian companies, have won a 20 billion rouble ($390 million) contract for the project linking Moscow to Kazan in Russia.

The consortium will oversee engineering research and project planning, China Railway said in a statement.

With a maximum design speed of 400 kilometers per hour, this will cut the journey time from Moscow to Kazan, the capital of the Russian republic of Tatarstan, to three-and-a-half hours from the current time of more than 14 hours. The project is due to be completed by 2018.

Zhu Ying, general manager of the China Railway Eryuan Engineering Group Co, told the Beijing News that the tough terrain between the two Russian cities will not pose a problem. He said that Chinese companies are experienced in supplying equipment for challenging conditions in extreme weather.

Zhu singled out the high-speed link between Harbin, capital of Heilongjiang province, and Dalian, a coastal city in Liaoning province, which opened in 2012, as a perfect example. Temperatures plunge to minus 50 Celsius on the line－conditions similar to the 770 km rail project.

Total investment in the link is estimated to be more than 1.06 trillion roubles, with China helping to finance the project, which will connect Moscow and Kazan before being extended to China's Urumqi, capital of the Xinjiang Uygur autonomous region, according to media reports.

Liu Huaqin, a researcher with the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce, said these massive investments are part of Russia's plan to upgrade its transport infrastructure.

The country's economy relies heavily on exports of raw materials, especially oil and gas, and these have to be transported. Still, these infrastructure projects come at a time when global energy prices are falling.

Against this backdrop, Liu said, Russia is looking toward China for financial investment and expertise in high-speed train technology. In addition, the project will be an extension of the Silk Road Economic Belt, Liu said.