Chinese rail investment in UK raises safety and corruption concerns

Doubts cast on mainland involvement in costly British high-speed transport development

PUBLISHED : Friday, 10 January, 2014, 1:28am
UPDATED : Friday, 10 January, 2014, 4:40pm

Premier Li Keqiang's offer to invest in Britain's HS2 high-speed railway project will be a political and financial boon to the British government, analysts say, but there will be concerns over safety and corruption in the Chinese rail industry.

Zhang Fan, an investor relations manager at China Railway Group, a state-owned rail construction firm listed in Shanghai and Hong Kong, confirmed it was in talks with Britain over HS2.

An HS2 spokesman said it would welcome Chinese investment in the £42.6 billion (HK$543.5 billion) high-speed railway that would link London with Birmingham.

Li had pledged to invest in the project, the Daily Telegraph reported.

In a letter to the Birmingham City Council, China Railway offered to build links to the city's airport and other cities, the report said.

"It's a savvy way for China to go in. It may relieve the UK government's political headache over the cost," said Richard di Bona, who runs a transport consultancy in Hong Kong.

Richard Laudy, the infrastructure head at British law firm Pinsent Masons, said the British government was "very open to investment from China" because the level of debt in Britain meant it needed to look elsewhere for finance.

HS2 has encountered opposition in Britain, with Stop HS2, a grass-roots campaign, saying on its website the project is neither economically viable nor environmentally justifiable.

Laudy said: "The UK has very strict anti-corruption legislation which applies to all businesses.

"The fact that there have been [rail] scandals in China will not mean Chinese involvement will not be welcome in the UK.

"Chinese businesses will need help in ensuring they understand UK legislation and are putting processes in place to give confidence it will be complied with."

China Railway's former president, Bai Zhongren, died following an accident on Saturday, the company said. There were rumours that he committed suicide because he was being investigated for corruption.

A China Railway spokeswoman said it did not comment on rumours.

In July last year, former railways minister Liu Zhijun was given a suspended death sentence for corruption.

Di Bona said safety concerns could be a political headache for London. Two high-speed trains collided in China in 2011, killing 40 people.

Alan Wang, a Beijing partner of Freshfields Bruckhaus Deringer, an international law firm, said: "Any company involved in the construction of a rail network in Britain would be required to meet standards of safety and transparency."

Laudy warned of difficulty if Chinese investors insisted on using technology that did not comply with British standards.

The HS2 spokesman said the line would be built according to the "highest construction, environmental and performance standards".