Seeking transparent, responsible and sustainable financing for quality infrastructure projects, the G20 leaders endorsed the G20 Principles for Quality Infrastructure Investment at this year’s summit. A worker stands next to a high-speed train at the maintenance and repair depot of China Railway High-speed (CRH) rail service during a media tour in Beijing, China, 30 August 2018. (Photo: Reuters/Thomas Peter).These guidelines are meant to address criticism lodged against China’s Belt and Road Initiative (BRI). The key features neatly correspond to the litany of complaints about the BRI, such as allegations concerning corruption and debt traps, secrecy, poor quality and energy projects that burn coal.
To the yin of the BRI is the yang of Japan’s superior capacity for ensuring quality in the infrastructure it exports — or so Japan Inc. will have us believe – even when China is widely seen as having an upper hand in infrastructure bidding based on speed and price. The ongoing high-speed railway (HSR) rivalry between China and Japan vividly illustrates how the two nations collide over opportunities to export infrastructure. Originally pioneered by Japan, HSR became the norm in Europe over time, but it was China that revitalised HSR with magnetic levitation technology. Over 12,000 miles (19,300 km) of its HSR network was built over a mere nine years. HSR has become a significant component of the BRI that is aimed at facilitating connectivity and ensuring Chinese exports of goods and imports of natural resources.
Once China began to explore HSR opportunities abroad, a collision with Japan’s offering was inevitable. In 2015, the rivalry came into full view when China bested Japan in the bidding war for the Jakarta–Bandung HSR line. That same year, Japan’s Hitachi and Canada’s Bombardier delivered high-speed rail stock for service across Italy and last month won an order from Trenitalia for 14 more trains.
Japanese companies continue to explore opportunities in the United States (California, Florida, Texas and the Northeast Corridor) and elsewhere including Asia. Meanwhile, China is eyeing HSR projects in Malaysia, Myanmar and beyond. With high velocity and visibility, not to mention an eye-popping sticker price in the tens of billions of dollars, HSR projects can capture the attention and fuel the imagination of politicians, pundits and people. A successful HSR bid means a financial win with potential opportunities to supply cars and signals as well.
But the path to success is an arduous one. The Central Japan Railway Company, the owner of the Shinkansen bullet trains, is reported to have spent 5 billion yen (US$46.1 million) to promote its products and technology for the Washington DC–New York line, with no results yet. The real competition in HSR extends well beyond cost: the rivals battle for technological innovation as well as regional economic dominance, and ultimately, for ideological and geopolitical alliances.
Naturally, beneficiary states stress improved efficiency, jobs, access to markets through improved connectivity, environmental benefits and more. But HSR projects are not immune from challenges and criticisms. These include opaque methods used to justify the HSR project in the first place, typically overestimated demand and profitability forecasts, shortfalls in the expected environmental benefits, failures to reach more vulnerable segments of the population, and a blurring of the roles of the government and the private sector.
What difference should China and Japan aim to achieve with HSR? In a nutshell, they should strive for economic, environmental and social sustainability, underpinned by good governance, transparency and accountability. They should offer a full quality package that includes financial and non-financial
risk management and enhancement of benefits aligned with the UN Sustainable Development Goals (SDGs).
This would be a grown-up version of HSR, better attuned to the host state’s financial health as well as its sustainable development challenges and aspirations, including the need for other (slower) modes of public transportation to complement the HSR line. It would offer affordability, accessibility and safety, especially for women, people with disabilities, minorities, and other vulnerable persons. And it would facilitate the host state’s decision-making and implementation process by engaging stakeholders.
Can Beijing and Tokyo collaborate on sustainability standards and practices? China is already committed to greening the BRI through the Green Investment Principles, with 27 signatories from financial institutions in 12 countries, including Japan. The Principles address both environmental and social sustainability. Another coalition that aims to align the BRI with the SDGs is scheduled to be launched this year.
These initiatives can address the environmental and social sustainability challenges of HRS in BRI, even though some believe that China may be ‘greenwashing’ rather than greening the BRI. As for Japan, the anti-corruption, debt sustainability, transparency, and economic efficiency principles in the new G20 Principles, also endorsed by China, can create a useful governance framework for quality infrastructure, including HSR. These separate but potentially complementary initiatives involving the two rivals— if mutually recognised, coordinated and implemented well — can create positive impact on the ground.
The truth is that both Japan and China need the full spectrum of sustainability requirements to ensure that their HSR competition becomes a race to the top that yields long-term sustainable development benefits for the host country and people. Given their overlapping interests, it is high time for the two duelling nations to join hands to show in practice what it means to deliver quality HSR that contributes to sustainable development and to achieving the SDGs.
Motoko Aizawa is President of the Observatory for Sustainable Infrastructure, Washington DC