China plans to spend US$104.5 billion this year on extending its railway tracks by 5,2000 kilometers in what would be country's third-largest investment in its history, Caixin reported. A Ministry of Railways official said the plan is subject to adjustments based on the economy at large. Railway infrastructure investment showed signs of recovery in the last quarter of 2012 and would continue rapid growth, he said. Last year, 1.9 billion passengers were transported on railways across China, up 4.8% from 2011. Cargo transport leveled off close to 3.9 billion tons. Railway investment began to soar in 2009 with the development of high-speed railways. The Chinese government invested more than US$113.3 billion in rail that year, exceeding the total of the years between 1996 and 2005, only to top that in 2010 with a US$135.5 billion boost. The figure fell in 2011 following scandals in the ministry and a bullet train crash that killed 41 passengers.

What a difference a year makes for China’s high-speed rail ambitions, and for the Chinese economy.

After being abandoned and left to lie dormant, the scrubby farm fields around Bazhou in northern China have sprouted rail bridges, raised track beds and neat rows of workers’ dormitories. The fields are well on their way to becoming a link in the country’s rapidly-expanding high-speed rail network.

It is a sharp turnround from late 2011 when China slammed the brakes on its rail programme, suspending virtually all new investment after a bullet train crash killed 40 people and raised questions about the quality of the track that had already been laid.

That revival of rail investment and infrastructure spending, which started around the middle of last year, was a crucial factor in China’s economic recovery. When Beijing reports its latest growth figures on Friday, it is widely expected to show that the economy accelerated in the fourth quarter, breaking a run of nearly two consecutive years of slower growth.

Full-year growth in 2012 probably fell short of 8 per cent, the lowest in more than a decade, but the momentum in the final quarter has fuelled investor optimism that China will again be the world’s strongest-performing big economy this year, helping to make up for the struggles in the US and Europe.

“The end of 2011 was probably the worst in terms of the amount of money spent on infrastructure. It nearly came to a halt,” says Ken Peng, an economist with BNP Paribas in Beijing. “The bounce back in infrastructure investment was clearly the main driver of the rebound.”

Investment accounts for nearly half of China’s gross domestic product, making it as big an engine of growth as consumption and exports combined. Railway construction is only about 2 per cent of that, but its importance is far greater, stoking demand for steel and helping shape business sentiment.

A small city a little more than an hour’s drive from Beijing, Bazhou was at the sharp end of the cancellation of rail projects in 2011. It was meant to serve as a station on a line connecting the cities of Tianjin and Baoding, but the workforce laying the track fell overnight from 600 to 20.

“When they stopped building rail it led to thousands of companies, including state-run steelmakers, cutting production,” says Wang Mengshu, deputy chief engineer at the China Railway Tunnel Group. “These companies appealed to the central authorities and said if we don’t get back to building rail, we’ll be finished and workers won’t get paid.”

The government was initially in no rush to restart construction. In December 2011 it published a report that blamed dozens of officials and businesses by name for causing the deadly bullet train crash through lax application of safety standards. Railway plans also suffered aftershocks from the corruption investigation that led to Liu Zhijun’s removal from office as railway minister two years ago.

But in early 2012 as the depth of the economic slowdown became clearer, Wen Jiabao, China’s premier, signalled that it was time for rail investment to resume. He visited train manufacturers and railway construction sites, giving the industry a vote of confidence.

That was quickly translated into a series of budget increases for the railway ministry, from Rmb400bn at the start of the year to more than Rmb600bn ($96.5bn) by the end of the year. Investment shot up in the second half, rising 80 per cent from a year earlier in September and October.

With high-speed trains now running a little more slowly than before, with few apparent glitches, Mr Wang says China’s railway boom is set to run for years to come. “Our rail system is still far from sufficient and building more high-speed lines is a necessity.”

He noted that China has 93,000km of track for a population of 1.3bn, whereas the US has nearly three times that amount of track – 230,000km – for a population that is a quarter of China’s at 300m.

Construction has fallen quiet again recently in Bazhou, but that is because of the deep winter freeze in the country’s north. A security guard at the foot of a 30m-high rail bridge that had been built just before the cold weather arrived said that workers were expected to return in full force after the Chinese lunar new year festival in February.

The railway boom has also started to change the daily commutes of urban residents throughout China, with central planners approving more than 60 subway and light-rail lines last year. Beijing this month opened four new or extended subway lines, which were brimming with passengers within hours.

Looked at purely from the perspective of Chinese growth, though, there is one big downside. As the size of the country’s rail network expands, the rate of increase in new investment will inevitably decline because so much has already been built. Mr Peng says that 2013 could in fact mark the peak for rail construction.

“Right now, this is the strongest moment for investment,” he says. “But later on this year we will start to see some constraints. Growth will slow.”

The use of special software that allows passengers to buy online tickets more quickly than regular website purchasers has created an unfair advantage with buying highly sought-after rail tickets as the traditional Spring Festival holiday period approaches, eastday.com reports.

The software also poses security risks to passenger information submitted online, such as passenger names, passwords and ID numbers, as it causes the regular ticket-booking website to sometimes malfunction according to railway experts.

Some passengers are using the software to buy tickets on the Ministry of Railways ticket-booking website (www.12306.cn), making it unfair for others trying to buy rail tickets online, said Zhu Jiansheng from the Institute of Computing Technology at the China Academy of Railway Sciences. "We are studying methods to ensure the fairness of access to railway tickets."

Many people have complained that the official ticket-booking website is no longer as busy and prone to problems as it once was, although train tickets remain very difficult to book. In many cases, they say they must use special ticket-booking software made by companies like Google, Kingsoft and 360 to buy tickets.

Rail ticket purchases already have entered their annual peak period in the run-up to the Spring Festival holiday period when many people travel back to their hometowns for family reunions. On Thursday, the Shanghai railway service sold 364,000 tickets.

Tickets for many trains were sold out in five to 10 minutes, while others for more popular destinations were gone in just 20 seconds. For example, tickets for the K696, the only train from Shanghai to the eastern part of Chongqing, were nearly sold out in three minutes with only 11 soft sleepers left. Shortly afterwards, the website began functioning abnormally after passengers clicked on the "buy ticket" button. After 20 minutes, all the train tickets had been sold out when normal online service resumed.

China's high-speed railway technologies are looking for increased export markets as Chinese companies acquire independent intellectual property.

Earlier last year, California's lower house approved financing for a new railway line that will link the cities of San Francisco and Los Angeles at an estimated cost of $68 billion. China's Ministry of Railways had announced that Chinese companies would form a group to enter the bidding.

"One of the favorite bids for the project has come from a Chinese consortium, and it is China which has built more high-tech, high-speed railway links than anyone else in the last year," BBC News reported in 2011 about China's bids.

Professor Richard White from Stanford University, was quoted in the same report as saying that "the way they are talking about building it now will be American labor laying the tracks, but heavy investments in Chinese technology and even trying to get inputs of Chinese capital.

"It's as if the Pacific has suddenly switched over in 150 years."

Also, earlier reports disclosed progress on China's high-speed railway technical cooperation with other countries, including Russia, Brazil and Saudi Arabia.

The 'going-out' strategy of China's high-speed railway technologies is supported by growing efforts to protect intellectual property rights.

"As far as I am concerned, there is not a single legal intellectual property rights dispute over China's high-speed railway technologies," said Tian Lipu, commissioner of the State Intellectual Property Office.

"Although we did buy technologies from Germany, France, Canada and Japan, our Chinese scientists 'digested' the technologies we bought legally, and developed our own technology," Tian said.

Currently the State Intellectual Property Office has granted more than 900 patents related to high-speed railway.

"China's high-speed railway technology should not be subjected to groundless accusations from abroad," he said.

Tian said the State Intellectual Property Office has coordinated related departments to provide legal services for China's companies to protect their intellectual rights outside China. For example, the office opened a helpline, 12330, to provide legal advice to companies.

"Chinese companies should accumulate more experience in protecting their own intellectual property rights and in dealing with overseas lawsuits, and we encourage the companies to apply for patents outside China," Tian said.

According to the latest statistics released by the World Intellectual Property Organization, the total number of patents approved in China increased 34.6 percent in 2011 from the previous year.

However, Huang Xiantao, an expert on intellectual property rights at the China International Association for Urban and Rural Development, said China's high-speed railway patents are far from enough.

"The companies should apply for overseas patents for all the high-speed railway technologies we developed, so that China will have an advantage in world competition," Huang said.

Currently, companies tend to apply for more patents inside China rather than in the US, Europe and Japan.

"On the other hand, when you develop a new technology, you can apply for numerous patents on the basis of the technology. But most of China's companies do not recognize this, so they just apply for patents for the technology itself, but neglect other patents based on the technology," he said.

As for groundless accusations from overseas, Huang said China's railway authority should use media to refute false accusations, and seek legal help to crack those cases that stain the image of China's high-speed railway.

The European Rail Traffic Management System, designed by rail technology leader Bombardier Transportation, has been rolled out on the latest very high speed rail line to open in China.

The new line completes the world’s longest very high speed rail link, connecting the capital Beijing with the industrial centre of Guangzhou.

Equipped with Bombardier INTERFLO 450 ERTMS Level 2 technology (called CTCS-3 in China), the final section of the 2,298 km long north-south, double-track link between Beijing and Zhengzhou started operation on December 26th, 2012.

With operating speeds of 300km/h, the line has cut rail travel times from 22 hours down to around eight hours, boosting transportation capacity and economic development along the route.

This latest high-profile line to be opened, equipped with the BOMBARDIER EBI Com 2000 radio block centre and EBI Cab 2000 ATP onboard technology, is Bombardier’s most recent contribution to China’s very high speed rail network.

It comes exactly three years after the implementation of its ERTMS Level 2 technology on the first section of the new link, which was then the world’s fastest ERTMS line.

The 1,000 km Wuhan to Guangzhou line opened in 2009 with an initial operating speed of 350 km/h.

Bombardier’s technology is also operating on the flagship Beijing to Shanghai line since 2010, on two routes linking Shanghai with Hangzhou and Nanjing, as well as on the Hefei to Bengbu and the recently opened Harbin and Dalian lines.

Peter Cedervall, president, Rail Control Solutions, Bombardier Transportation, said: “Our projects in China are an important part of our global ERTMS portfolio and project delivery experience.

“Trains equipped with Bombardier’s state-of-the-art very high speed rail control technology have now travelled more than 300 million km in China.

“That is the same distance as a return trip to the sun, with a further 15 million km added every month.

“We have more than 1.5 million hours, or 170 years worth of operational experience in this market alone, reflecting the maturity and reliability of our ERTMS technology.”

With a strong involvement in the development of ERTMS/ETCS technology, Bombardier’s solutions are operating or being delivered on more than 2,500 vehicles and 15,000 km of track in 16 countries.

As well as running on the highest speed lines in China, the INTERFLO 450 Level 2 solution has permission for commercial operation on the Amsterdam-Utrecht line in the Netherlands, one of the busiest mainlines in Europe, and was inaugurated on Sweden’s first high speed ERTMS Level 2 line, the Botnia line, in 2010.

Bombardier ERTMS technology is also installed in Croatia, Korea, Switzerland, Spain and Taiwan and first-in-market projects are being delivered in Algeria and Poland, in addition to extensive framework agreements in Sweden and Norway.

Bombardier is at the heart of innovation, delivering the world’s first ERTMS Regional system, its INTERFLO 550 solution, on the V?sterdal Line in Sweden.

Celsius Coal Limited is very pleased with the announcement by the Kyrgyz Republic Ministry of Transport regarding the completion of the feasibility study for the Trans-Asia Railway. Based on the announcement and related reports, the study is now being translated into Kygyz and Russian to allow for more formal discussions to take place regarding implementation.

Highlights:

1. Kyrgyz Republic State Secretary of Ministry of Transport announced that China has completed the preparation of the feasibility study for the People’s Republic of China-Kyrgyz RepublicRepublic of Uzbekistan railway

2. The proposed railway route passes within approximately 10km of Celsius’ Uzgen Basin coking coal projects and would create a rail-link of approximately 250km to Kashgar (Kashi), the closest major coal market in China and hub to existing Chinese rail network

3. Celsius has identified interim road export routes to China

Completion of the feasibility study is in line with various statements made by the governments of People’s Republic of China and Kyrgyz Republic in September and December 2012 regarding accelerating the project. The railway is currently anticipated to be completed by the end of 2016.

The current mapped route comes within 10 kilometers of Celsius’ Uzgen Basin coking coal projects and will connect to the existing Chinese railway network at Kashgar (Kashi) in Xinjiang.

On Tuesday, online train ticket website 12306.com was visited by 17 million users fighting to get train tickets back home during the upcoming Spring Festival holiday.

However, fewer than 2.7 million tickets were available to be purchased from the site that day, with most of the tickets sold within minutes.

Such imbalances in supply and demand during the annual holiday travel rush have resulted in significant complaints and criticism directed at railway authorities.

Although railway authorities have long been criticized for being impersonal and out-of-touch, efforts by some rail companies to use microblogs to connect with their customers have started to prove useful.

After the announcement of a new policy that allows train tickets to be sold 20 days in advance of a customer's preferred departure date, a railway company in south China's Guangdong province posted a special calendar on Sina Weibo, a popular microblogging site, that allows customers to easily see how far in advance they can purchase tickets for any given day in January.

The calendar has been reposted tens of thousands of times on Sina Weibo and other microblogging platforms.

Although the 20-day advance purchasing policy was issued on Dec. 31 of last year, the language used by railway authorities to announce the change failed to attract attention.

However, the calendar posted by the Guangdong rail company has attracted a great deal of attention, as well as been imitated by other railway companies.

Following the post from Guangdong, the Beijing West Railway Station has also designed its own take on the calendar and posted it online, as well as printed it out and hung it in the station's brick-and-mortar ticket office.

Other types of special calendars, as well as flow charts and lists of "booking tactics," have been promoted online by railway companies and authorities.
 

Wang Likun, an employee from the Beijing Railway Company's publicity department, said the public's recognition of calendars indicates that netizens have new expectations in terms of how authorities should speak online.

"We have to use the folks' language to help people more easily understand," Wang said.

Xiaoyue, who edits the Beijing West Railway Station's microblog, said the essence of successful online communication lies in delivering information in a simple and direct way.

"Only sincere communication can promote understanding and improve our service," Wang said.

Spring Festival, which falls on Feb. 10 this year, is China's biggest holiday. It is custom for families to reunite for the holiday, a factor that has led to massive seasonal travel rushes in recent years as more Chinese leave their hometowns to seek work elsewhere.

Public transportation is expected to accommodate about 3.41 billion travelers nationwide during the holiday, including 225 million railway passengers, according to an estimate from the National Development and Reform Commission, China's top economic planner.

Chinese travelers are using apps to cut in line as the nation’s train-ticket website strains under 120 million views a day in the run-up to the Lunar New Year.

Li Juan joined at least 6 million people using “ticket- grabber” apps after spending five hours fruitlessly clicking on the rail ministry’s site. Using the program, she made her reservations for next month’s holiday season within two minutes.

“It was so easy,” said Li, 38, who runs a clothing shop in Hangzhou, eastern China. “I had been cursing all the time while trying to get into the railway ministry website.”

The free apps from Internet companies including Qihoo 360 Technology Co. and Kingsoft Corp. have split government departments and highlighted a digital divide within China. While the tech-savvy can more easily make bookings, low-wage workers living thousands of miles from their families are finding it harder to buy tickets at stations for their once-a-year trips.

“This is definitely unfair,” said Zhao Jian, a professor of economics at Beijing Jiaotong University, which focuses on transportation. “In the past, migrant workers with stamina could get tickets. Now, people with technology get them.”

The programs ease use of the ministry’s website by automatically resubmitting a booking request every few seconds until it is accepted. Without one, users have to click and sporadically re-enter travel details themselves. www.12306.cn

Station Lines

The rail ministry, which has a monopoly on ticket sales, introduced the website last year to tackle black-market transactions and to ease lines at stations that often leave passengers waiting for hours. It is offering 36 percent of tickets via its website. Online buyers are also able to make reservations two days earlier than customers buying at stations.

About 6.75 million tickets are being sold in total each day, 13 percent more than a year earlier, Cheng Xiandong, a rail ministry official, told the state-run People’s Daily newspaper this week. The network will probably carry 224.5 million passengers during the 40 days starting Jan. 26, according to the ministry. The weeklong holiday begins Feb. 9.

The rail ministry suggested the ticket-grabber apps should close because they are generating extra website traffic and making it even harder for non-users to make a booking, according to the People’s Daily report. The technology ministry has taken a more supportive position.

“We encourage Internet companies to improve and innovate in the ways they serve people,” Zhang Feng, a Ministry of Industry and Information Technology spokesman, said at a Jan. 23 briefing. The ministry has asked the companies to work with rail authorities on making it easier to purchase tickets, he said.

The ticket website had 120 million views on Jan. 19, more than Sina Weibo, a Chinese version of Twitter, said Joseph Qiu, a manager at Internet data provider Experian Hitwise. The rail ministry didn’t reply to faxed questions from Bloomberg News.

Stranded Travelers

Li Yunying, 33, and her husband are among travelers who will probably miss out on a trip home this year because they can’t made train bookings. The Guangdong province textile- factory workers, who rarely use the Internet, have so far failed to buy tickets even after calling the sales hotline more than 60 times and making three trips to the jammed station.

“I am disappointed and unhappy, but have no way out,” said Li, whose two children live at least five hours away by train in Hunan province. “We work for 11 hours a day -- how can we learn to use new things like this software?”

Qihoo, Kingsoft

Qihoo’s ticket grabber has been used by more than 5 million people this year. The Beijing-based company has no plans to close the app because of the support from the technology ministry, said Ai Yongchun, a spokeswoman. Qihoo, China’s largest Internet-security software provider, also offers an app for calling the ministry’s phone line that has been used by more than 3 million people, she said.

Kingsoft is helping low-wage workers who don’t have access to computers by renting buses so some of them can get home for the holidays, said Jin Lei, marketing director at the Hong Kong- listed company’s Internet-security unit. Its ticket-grabbing app has been used by more than 1 million people.

Rao Yuan, 28, a bank worker in Wuxi city, Jiangsu province, successfully used an app to book two tickets for a trip to his home in Hubei province, he said. That means he can get home in about four hours, half the time taken by bus.

“The software did me a big favor,” he said. “Going by bus would have been a lot of hassle.’

Fears over intellectual property rights will not derail China's exports of bullet trains, as the technology is home-grown, the vice-minister of science and technology said as he dismissed as "nonsense" copycat claims by a Japanese company.

The country had developed its own version of high-speed technology through years of innovation, Cao Jianlin said in an exclusive interview.

Cao also encouraged Chinese companies to file for patents overseas.

China's high-speed rail industry has been booming since 2004, and Cao said the sector "will further research patent strategy and the global IPR situation to better understand the laws and policies of countries they export to".

His comments come after Kawasaki Heavy Industries suggested China had not developed its own high-speed technology.

The Japanese company teamed up with CSR Sifang, which then produced China's bullet trains after the Ministry of Railways launched a bidding process to build a high-speed network. Purchasing contracts and technology transfer agreements were signed with Chinese counterparts.

Other global companies, such as Siemens of Germany, Alstom of France and Canada's Bombardier, also signed the contracts and agreements.

"China says it owns exclusive rights to that intellectual property, but Kawasaki and other foreign companies feel otherwise," the Japanese company said in a statement quoted by The Wall Street Journal.

The statement added that Kawasaki was looking to solve the issue through talks.

"We did buy trains that could travel at 200 kilometers per hour from Kawasaki, but the purchase was based on legitimate contracts," Cao said.

"Chinese companies paid technology transfer fees according to the contracts, so it is nonsense to accuse China of copying their technology."

Kawasaki constructed the Shinkansen, Japan's bullet train. However, like other manufacturers, a drop in global demand prompted the company to look at overseas markets.

"If Kawasaki really believes China copied its Shinkansen technology, it should have sued the Chinese companies, instead of complaining to the media," Cao said. "Maybe the company did not expect China's high-speed railway to grow so quickly, making the country a world leader."

Based on the transferred knowledge, China's scientists developed a wide range of technologies, including system integration and component parts, the vice-minister said.

Before 2005, China had few patents relating to high-speed trains. The numbers soon started to increase and in the first half of 2012, 163 patents were registered in China. Of these patents, 90 percent were held by Chinese companies with German, Japanese, French and US companies making up most of the balance, according to Cao.

The Ministry of Science and Technology also carried out high-speed technology innovation. For example, the ministry arranged a group of research projects. The projects attracted 2.2 billion yuan ($350 million) in government investment and more than 5 billion yuan from the business sector.

"The sci-tech projects helped us to build independent intellectual property rights," Cao said. Chinese companies are producing three 350 km/h trains, and the goal is to link the high-speed network with lower-speed trains, for example elevated trains, traveling inside a city. "This could change people's way of life," Cao said.

It is feasible that people could live and work in different cities, Cao said. "A dynamic economy needs greater public mobility."

On Dec 26, a new high-speed rail line opened linking Beijing and Guangzhou, but the ticket prices raised a few eyebrows.

Prices for the 2,298 km journey ranged from 865 yuan to 2,727 yuan for the 8-hour trip.

"We have to admit that the ticket price is too high for most people," Cao said. "But we should also be aware that there are some people who are willing to pay the high price to save more time.

"That is the reason we construct high-speed railways - to save time for people who would like to pay more."

Wider economic development benefits of high speed rail projects are  significant and are worth considering in the evaluation of such programs, in addition to traditionally measured direct transport benefits, suggests a new World Bank research paper released today.

According to the paper titled High-Speed Rail, Regional Economics, and Urban Development in China, there is an emerging consensus that major transport investments may have significant impacts that are not well captured through conventional cost-benefit analysis.  Conventional economic evaluations of major transport infrastructure investments tend to focus on the direct costs and benefits arising from travel, including time savings for travelers, cost savings for operators, and reductions in aspects like air pollution, noise, and accidents.

In China, the high speed rail program is changing the dynamic of travel, with more people travelling by high speed rail than flying.  The World Bank has supported both econometric studies and on-the-ground surveys that begin to identify and quantify these impacts in the context of the country’s emerging high speed rail program. 

Based on this and other research, the Bank has begun to pilot a methodology to evaluate wider economic development benefits for several high speed rail projects, and has found them to be significant - of the same order as direct transport benefits. Crucially, these benefits of larger and better connected markets accrue to businesses and individuals even when they themselves do not travel as the flow of ideas and people accelerate. The paper highlights this research and methodology and some of the policy implications to maximize these benefits in practice.

Gerald Ollivier, World Bank’s Senior Transport Specialist working on the high speed rail program in China gave an example. "Look at the case of Zhengzhou on the 2,298 km Beijing to Guangzhou line opened on December 26,” he said. “In the past, in a three hour conventional train journey on this line, about three million people from Anyang, Xinxiang and Handan can reach Zhengzhou;  today, with the opening of the new high speed line, this number will surge to 28 million people from eight cities. These cities will start to work more closely together as a return trip within a day will be within reach. The impact in terms of economic exchanges, accessibility, and productivity gains are expected to be significant, and extend beyond traditional transport savings. The scale and scope of the Chinese high speed rail program offer a unique opportunity to try to measure such impacts."

SHANGHAI--China's Ministry of Railways has received approval from the nation's economic planning agency to issue 150 billion (US$24.12 billion) worth of bonds this year to finance the costly maintenance and construction of a fast-expanding railway network, people familiar with the situation told Dow Jones Newswires Thursday.

With the permission from the National Development and Reform Commission in hand, the debt-laden railway ministry is on track to issue the first batch of the bonds, which will be worth CNY20 billion, in March, said the people, who didn't wish to be named.

The bonds scheduled for sale in March will have a 10-year maturity, they added.

The ministry is China's largest corporate-bond issuer.

Officials from both NDRC and the ministry couldn't immediately be reached for comment.

Minister of Railways Sheng Guangzu said earlier this month that Beijing will increase investment in the sector this year to CNY650 billion yuan, up from last year's actual investment of CNY631 billion.

This year, CNY520 billion will be spent on infrastructure compared with CNY400 billion last year, some of which will go toward extending the rail network by 5,200 km, Mr. Sheng said.

As of the end of September, the railway ministry had a debt-to-asset ratio of 61.81%, up from 60.63% at the end of 2011.

Since the middle of last year, Beijing has been accelerating approvals for infrastructure investment, notably for railway and subway networks, to stimulate the economy.

Investment in the railway sector, especially in the ambitious high-speed railway network, had previously stalled following a deadly accident and a high-profile corruption scandal two years ago.

The construction of China's New Eurasian Land Bridge through Central Asia has been gathering speed in recent months and looks to make even greater progress in 2013.

At the end of 2012, China and Kazakhstan opened their second major rail link at the Xinjiang-Kazakhstan border city of Korgas. The new link comprises a 300-kilometer section in both countries that connects their rail networks from Jiangsu Province to the rest of Kazakhstan's rail system, which itself is being expanded through enhanced China-Kazakhstan cooperation.

On December 22, 2012, Kazakhstan Temir Zholy, the national railway company of Kazakhstan, reported that Kazakhstan and

 
China have started using the new railway crossing of Altynkol-Khorgos. It is expected cargo transportation will reach 10 million tonnes in 2015 and 15 million tonnes in 2020.

Industry observers expect the Korgas Pass, which now connects China and Kazakhstan by a railway, a highway and an oil pipeline, to handle 20 million tonnes of cargo per year by 2020 and 35 million tonnes per year by 2030. [1]

Riding the rails
Until now, the only railroad border crossing between China and Kazakhstan was between Alashankow in China and Dostyk station in Kazakhstan. This 460-km line to Urumqi in Xinjiang and Alataw Pass, where it connects to Kazakhstan's railways, represented China's only currently operational rail link with Central Asia.

The rail crossing at Alataw Pass handles more than 15 million tonnes of freight each year with almost twice as much cargo moving westward from China as eastward. So far, more than 150 million tonnes of freight have been transported through the Alashankou/Dostyk crossing since it began operation in 1991. On June 14, 2010, a freight train carrying 45 tonnes of liquefied natural gas crossed the Chinese-Kazakhistani border at the Alashankou/Dostyk checkpoint en route to delivery to the Dushanzi petrochemical plant in the northern Xinjiang Uygur Autonomous Region. The shipment marked the first time that China imported energy resources from Central Asia by rail.

Last April saw the official opening of the first transnational free-trade center in Central Asia, located along the cross-border river near the Xinjiang village of Horgos. This China-Kazakhstan International Border Cooperation Center occupies 3.43 square kilometers of land inside northwest China's Xinjiang and 1.85 square kilometers on the Kazakh side. The Horgos center has been developed into a "free port" with tax reimbursement for exports, duty-free purchases for visitors and provisions for 30-day visa-free stays.

This special economic zone supports trade negotiation, financial services, commodity display and sales, warehousing of goods, transportation, hotels, restaurants, shopping, entertainment and tourism. Additionally, border crossing procedures have been improved in this cooperation zone, making it easier and faster for border inspection authorities and civilians to navigate within this area.

Construction also will begin this year on a high-speed railway line between Kazakhstan's capital, Astana, and the former capital Almaty, which is still most important commercial hub, benefiting from its proximity to China. Trains along this 1,050-kilometer line, which has many bridges and elevated sections, are projected to travel as fast as 350 km/h. This will reduce the travel time for passengers to a four-hour journey. China's will own a 30% share of this US$16 billion project.

Energy the driving force
Although security considerations initially dominated Beijing's policies toward Kazakhstan and its other newly-independent Central Asian neighbors, economic and especially energy concerns have become increasingly important.

Thanks to its energy riches, Kazakhstan has become China's most important economic partner in Central Asia. Commercial ties between Kazakhstan and China were minimal during the first decade of Kazakhstan's independence due to the economic chaos in Central Asia following the breakup of the integrated Soviet economy as well as the legacy effect of the security barriers erected along the sealed Sino-Soviet frontier during the Cold War.

The overlapping ethnic groups between the two countries helped launch the initial commercial ties between Kazakhstan and China, overcoming those original barriers. During the last decade, Kazakhstan has achieved rapid economic growth rates due largely to the soaring value of oil exports. These developments have raised the country's per capita gross national income to around $12,000 and have helped position Astana as a key Chinese partner.

In a 50-50 joint venture, the Chinese National Petroleum Corporation (CNCP) and KazMunaiGaz built an oil pipeline from Kazakhstan's Atyrau port along the Caspian coast to Alashankou in China's northwest Xinjiang region. When it began operating on a limited basis in December 2005, the delivery marked the first eastward flow of Central Asian oil and China's first receipt of imported oil by pipeline. Now, one fifth of Kazakhstan's oil flows to China.

In 2010, the Central Asia-China pipeline began transporting natural gas from Turkmenistan through Uzbekistan and Kazakhstan to China. This 2,100-kilometer gas pipeline is expected to deliver around 40 billion cubic meters (bcm) annually by 2015.

In another joint CNCP-KazMunaiGaz project, Astana has invested $130 million to augment a $1.8-billion loan from the China Development Bank, to construct a 1,500-km natural gas pipeline from Beyneu in western Kazakhstan to Bozoi Shymkent. From there, the 50-50 owned Beineu-Shymkent Gas Pipeline LLP will connect with the Central Asia-China gas pipeline as well as provide gas to southern Kazakhstan, a region that must currently import gas.

It also plans to construct a Pipeline "C" that would provide a third Kazakhstani gas pipeline into China. When all three conduits are fully operational in 2015, they will deliver up to 60 billion cubic meters of gas to China annually - or about half of the PRC's anticipated demand for imported gas then. At the end of 2012, the CNCP opened the last section of its $22 billion, 8,704-km pipeline, which can carry as much as 30 bcm from Huoerguos on the China-Kazakhstan border in northwest Xinjiang Uygur region to Shanghai, Guangzhou and Hong Kong.

The volume of Kazakhstan's trade with China now exceeds that with Russia for the first time in centuries, and China has been Kazakhstan's second-largest trading partner since 2009. Two-way trade between the two countries increased from $1.29 billion in 2001 to $33 billion in 2012 - or almost one third of all Kazakhstan's foreign trade.

At least for now, China is surpassed by only the European Union, which has almost a 40% collective share in Kazakhstan's total external trade due to its purchases of Kazakh oil. On December 8, 2012, during discussions with visiting Chinese Vice Premier Wang Qishan in Astana, President Nursultan Nazarbayev said Kazakhstan will intensify its efforts to finish the natural gas pipeline that is being co-built with China by 2014 in order to increase natural gas exports to China.

Bilateral economic ties should expand further given that both countries regularly enjoy some of the world's fastest economic growth rates and China's growing demand for Kazakhstani's rising exports of oil, natural gas and uranium. When Kazakh Prime Minister Karim Masimov met with Premier Wen Jiabao on April 9, 2008, he stressed Astana's commitment to enhancing bilateral commerce through infrastructure development, specifically citing the need to improve Kazakhstan's ports, customs and banking systems, railways, highways and other commercial networks involving China.

That month, the two governments signed an Action Plan for Cooperation designed to diversify bilateral trade beyond commodities and included 20 development projects in agriculture, new technologies, cross-border trade, transportation and communication. [2] When he visited Beijing in last June, Nazarbayev said he "welcomes Chinese investment in the Central Asian country's transport infrastructure, and hopes that the pace of the trans-border railway and highway projects between the two countries will be quickened".

Three months later, Premier Wen called for China and Kazakhstan to accelerate their cooperation in trade, infrastructure construction and other economic areas. The two governments recently set the goal of raising bilateral trade to $40 billion by 2015.

Given their expanding trade ties, it is unsurprising that China's railroad building efforts have primarily focused on expanding Kazakh transit capacity. Beijing's ambitions, however, extend far beyond that. China has been anchoring the new 11,870-km Eurasian Land Bridge that extends from Lianyungang city to Rotterdam, a major West European port. Using this uninterrupted railroad route through Central Asia, Russia and Europe allows cargo to travel five times faster from China to Western Europe than by ship.

Given its higher transportation costs, the rail route is most suitable for high-value-added freight such as electronic and mechanical goods. Beijing has been using its leading role in the Shanghai Cooperation Organization and other multinational institutions to mobilize multinational support behind these Eurasian transportation and other infrastructure projects as it tries to move up the value-added chain.

China and Kazakhstan also are major players in the 8,700-km Western Europe-Western China international transport corridor, which will become the shortest road transport link between Central Asian countries and Europe. Once completed in late 2013, containers will take just two weeks to move from China's eastern seaboard to Europe, three times faster than if they went by sea.

The European Bank for Reconstruction and Development, the World Bank, the Asian Development Bank and the Islamic Development Bank are providing millions dollars in funding for the highway. More than 30,000 Kazakhstani workers are helping construct a 1,734 km stretch that passes through four regions of Kazakhstan (Aktobe, Kyzylorda, Zhambyl and South Kazakhstan). Nazarbayev called the highway the "construction of the century" in his 2012 State of the Nation address.

In his Kazakhstan-2050 national development strategy announced last month, Nazarbayev said the existing projects should double the transit capacity across Kazakhstan by 2020 and set a new goal of increasing this capacity 10-fold by 2050. Nazarbayev also declared Kazakhstan should help develop key transit hubs throughout Eurasia and beyond.

Remaining challenges
China is making progress in improving its transportation links with Greater Central Asia. The existing and proposed near-term connections between China and its western neighbors will still service only a small share of China's foreign commerce, which will likely remain dominated by containerized cargo shipping by sea. Much additional progress is needed in this area to achieve the higher levels of bilateral commerce sought in both Astana and Beijing.

In addition to the underdeveloped economic infrastructure connecting the two sides, other impediments to expanded commercial exchanges include unsupportive visa policies, special regulations on Chinese consumer products, corrupt commercial practices in both countries and Kazakhstan's absence from the World Trade Organization (WTO).

Ironically, one factor discouraging Kazakhstan's rapid entry into the WTO has been Kazakh concerns about having their national industries devastated by Chinese competition in the absence of protective barriers - as happened with neighboring Kyrgyzstan.

Kazakhstan's close economic ties with Russia also have disrupted some Sino-Kazakh economic ties. On the one hand, much Russia-China trade goes through Kazakhstan. On the other hand, Russia has sought to prevent the newly implemented Russia-Kazakhstan-Belarus Customs Union from serving as a backdoor for the smuggling of cheap Chinese goods into Russia by pressing Kazakhstan to tighten controls at the Sino-Kazakh border before Russia and Kazakhstan eliminated their joint checkpoints.

Some Kazakhstanis complain they can no longer buy cheap Chinese imports and must now spend more to purchase often inferior quality goods from Russia and Belarus. Russian President Vladimir Putin's proposed Eurasian Union, which Astana has said it will join, could erect further economic and perhaps other barriers between China and Kazakhstan.

Conclusion
Both China and Kazakhstan benefit from their cooperation in trade, transport, and energy; however, these developments do not portend a deeper, strategic alliance between the two countries - both of which are strongly committed to their independence.

The Kazakh government is especially keen to maintain balanced relations between China, Russia, Europe and the United States to avoid domination by any single actor. Chinese leaders also have been restrained about antagonizing Russia by appearing to threaten Moscow's interests in the region. In many cases, these coincide, or at least do not conflict, with China's core regional interests.

Yet, this harmony also results from Kazakhstan and the rest of Central Asia's being of lower strategic priority for Beijing than for Moscow. China's expanding interest in securing Central Asian energy and economic opportunities could lead Beijing to reconsider its policy of regional deference.

The Chinese authorities are still developing their strategies, tactics and capabilities to defend their growing foreign economic assets, which in Central Asia include energy pipelines and the foreign operations of several major companies.

Central Asian as well as Chinese and Russian policymakers would prefer if Beijing could rely on the local authorities, supported by Moscow, to protect these assets, but the failure of these non-Chinese actors might compel all parties to accept, if reluctantly, a large and enduring Chinese security presence in their region.

Notes:
1. The Korgas Pass is 200 km from Astana, 670 km from Urumqi, and less than 100 km from Yining, the principal city in China's Ili Kazakh autonomous prefecture.
2. Rouben Azizian and Elnara Bainazarova, "Eurasian Response to China's Rise: Russia and Kazakhstan in Search of Optimal China Policy," Asian Politics & Policy, Vol. 4, No. 3, 2012, pp. 377 - 399.