China rail company plans new Mexico bid

China Railway Construction Corp (CRCC), one of the country's largest train makers, is to take part in Mexico's reopened bidding process for a $3.75 billion high-speed railway contract, more than two months after Mexico approved CRCC's bid, only to revoke it days later. The new bidding is scheduled for Jan 14.

Yu Xingxi, spokesman for China Railway Construction, said the company is still negotiating with the Mexican government, and is ready to participate in the second bid. It may face competing bids from Alstom, the French engineering group, and Canada's Bombardier. Both companies are considering taking part in the new tender.

"We are confident about making the bid this time," said Yu.

The company said it will come up with more comprehensive assessment against the potential risks, including turmoil and exchange rate fluctuation.

Negotiation with the Mexican government over compensation for the unilateral withdrawal of the earlier bid is still under discussion. The Mexican government said earlier that it planned to offer compensation based on the initial contract.

On Nov 4, the Mexican government announced it had sealed a deal with a Chinese-led consortium to build its first high-speed rail. But with the news still fresh, just five days later Mexico's president reversed the decision to accept the single bid.

The Mexican government explained the reversal was due to doubts and concerns over the legitimacy and transparency of the bidding procedures and to remove any doubts from the senators and the public about the contract.

Insiders said the reopening of the bidding will give competitors from other countries, including Japan and Germany, more time to prepare their proposals.

Wang Mengshu, an academic specialized in rail and infrastructure projects at the Chinese Academy of Engineering, believes that hopes are high that the Chinese-led group will win the revised tender.

"The high speed trains with operational speeds of over 300 km/h have been running in China for more than five years and the Chinese rail products have significant price advantages," said Wang.

The new railway will be used to carry some 23,000 daily commuters from Queretaro, the center of Mexico's aerospace industry, at speeds of up to 300 kilometers per hour, to Mexico City.

Even among competitive rivals, the advantage the Chinese companies have is that they are able to offer all the services required to finish the project, including rail vehicles, infrastructure construction, maintenance and professional training for local staff.

It's hard to compete with the conditions that the Chinese company offered, three years of construction period and five years of operation maintenance, said Wang, who is also a member of the team that is modifying the original bid document.

"China South Locomotive & Rolling Stock Corporation (CSR) is planning to establish a new manufacturing and maintenance base to serve the needs of Mexico, as well as its neighboring markets if the consortium wins the bid," he said.

However, Zhao Jian, a professor with the School of Economics and Management at Beijing Jiaotong University, said the bullet train rail project is hard to make profit.

The per-kilometer cost of the 210-kilometer high speed rail system in Mexico is far lower than those projects in China, and considering the higher construction cost in Mexico compared to China, it is believed the project might witness huge losses.

The per-kilometer cost of the high-speed rail project in Mexico is estimated to be $18 million, which is roughly half of the building cost in China, where rail costs 33 million per kilometer, said Tao Jingzhou, the Asian management partner of the US law firm Dechert LLP, in an article published on caixin.com.

In response to the difference, the consortium explained that the higher domestic rail cost is due to the speed of 350 kilometers per hour, whereas the Mexican rail project was planned to run at just 300 kilometers per hour, somehow making the cost lower.

Xia Ming, a professor of politics with the City University of New York, said if China wins the bid, it would further strengthen its trade cooperation with Mexico and help China's high-speed trail technologies go abroad and gain momentum for markets at home and abroad.

China's export of its high-speed rail system would also help China achieve its diplomatic and strategic purposes, he said.

China is now in talks with more than 20 countries over potential high-speed train projects, and has secured three overseas deals, including the second phase of the Ankara-Istanbul high-speed rail line in Turkey, and parts of the Haramain high-speed rail project in Saudi Arabia.

zhengxin@chinadaily.com.cn