Chinese Interest in US Rail Threatens National Security, Economy, US Experts Say

A Metro train enters the Farragut North station in Washington, on May 6, 2016. (Nicholas Kamm/AFP/Getty Images)

A new House bill and a recent congressional hearing have highlighted the potential threats that would come with using Chinese-made rail cars and transit buses in U.S. cities and regions.

Chinese companies could intercept U.S. rail control systems and compromise the safety of regular Americans, one former U.S. official warned.

H.R. 2739, titled the Transportation Infrastructure Vehicle Security Act, would prevent federal transit money from being granted to local transit agencies to procure passenger rail cars or transit buses made by Chinese state-owned, -controlled, or -subsidized enterprises, according to a press release from Rep. Harley Rouda’s (R-Calif.) office.

“China’s ‘Made in China 2025’ initiative is an unmistakable effort to harm American manufacturers by subsidizing Chinese rail and bus industries. Chinese companies misrepresent themselves as benevolent actors, but let’s be clear: this is an attack on our economy and national security,” said Rouda, who was the lead sponsor of the new bill.

Beijing rolled out “Made in China 2025,” an industrial blueprint that outlines how China will develop high-tech sectors such as robotics and advanced information technology, to eventually dominate global supply chains by 2025.

The U.S. administration under President Donald Trump has criticized Made in China 2025 for abetting Chinese entities’ theft of intellectual property, targeting primarily the United States and Europe, in pursuit of Beijing’s policy goals.

The bill was introduced on May 15 by Rouda, along with lawmakers from both sides of the aisle—Reps. Rick Crawford (R-Ariz.), Scott Perry (R-Pa.), Kay Granger (R-Texas), Tim Ryan (D-Ohio), Eleanor Holmes Norton (D-D.C.), Randy Weber (R-Texas), and John Garamendi (D-Calif.).

The Senate version of the bill was introduced in March by U.S. Sens. John Cornyn (R-Texas) and Tammy Baldwin (D-Wis.).

China’s CRRC

These latest bills were the culmination of concerns that took root around January this year, when media reports emerged that the Washington Metropolitan Area Transit Authority (WMATA) might award a contract to China’s state-owned rail car manufacturer China Railway Rolling Stock Corporation (CRRC).

CRRC has been the beneficiary of many government subsidies in recent years. According to the company’s website, it received a total of 1.298 trillion yuan ($193 billion) in subsidies in 2014 and 1.802 trillion yuan ($268 billion) in 2015.

On Jan. 20, four U.S. senators wrote a letter to WMATA expressing safety and security concerns about CRRC’s bid.

Dave Smolensky, a CRRC spokesperson based in Chicago, confirmed to Reuters in early May that CRRC was planning to bid for the D.C. Metro rail car contract this month. Additionally, Reuters, citing an unnamed industrial source, pointed out that CRRC also aims to win another contract to supply 1,500 subway cars to New York City’s metro system.

According to a separate Reuters report, May 31 is the due date for the D.C. Metro tender.

CRRC has pushed hard into the U.S. market in recent years, winning contracts in Boston, Chicago, Los Angeles, and Philadelphia.

“When Chinese companies swoop in to undercut contract bids for American rail projects, their only goal is to decimate our manufacturing sector by dumping cheap parts into our economy, while stealing intelligence and threatening our national security,” Crawford said.

Crawford added that the bill is needed to “protect our nation against foreign threats and cybersecurity attacks which have become more prevalent in this digital age.”

The new House bill, as well as the Senate version, includes provisions to improve cybersecurity within U.S. public transportation systems, such as requiring rail transit operators to develop and execute a plan for identifying and reducing cybersecurity threats.

“China is not making these rail cars so cheaply out of the goodness of its heart. Until we have irrefutable evidence, we must not turn a blind eye to the clear incentive China has to monitor our capital and undermine our security,” Norton said.

Chicago Tribune, in a March 2017 article, reported that CRRC’s $1.309 billion bid for providing rail cars for the Chicago Transit Authority was $226 million lower than the next-highest bidder, the Canada-based transportation company Bombardier.

Philly.com, in a March 2017 article, reported that CRRC’s bid of $137.5 million for a rail car contract with the Southeastern Pennsylvania Transportation Authority was $34 million less than the next highest bid by Bombardier, and $47.2 million less than a bid by South Korean rail manufacturer Hyundai Rotem. CRRC won and signed the contract two months later.

Congressional Hearing

A day after the House bill was introduced, the House Committee on Transportation and Infrastructure held a hearing about the impact of “state-owned enterprises”—with particular close scrutiny on CRRC—on the U.S. public transit and freight rail sectors.

One of the hearing witnesses was retired U.S. Army Brig. Gen. John Adams, who is now president of Guardian Six, a defense market researcher and solution provider based in Washington and Florida.

Adams pointed out that CRRC’s board members previously held high-level positions at several of China’s state-owned defense companies, including Aviation Industry Corp. of China (AVIC) and China Shipbuilding Industry Corp. (CSIC). Two former board members held positions at AVIC and the Chinese state-run defense manufacturer China North Industries Group Corp. (Norinco).

Norinco has been sanctioned multiple times by the U.S. State Department for contributing to Iran’s development of missile programs, including in 2003 for the sale of missile technology.

Meanwhile, CSIC was one of the Chinese companies that benefited from marine technology stolen by two Chinese nationals who were charged in U.S. federal court in 2018.

The risks associated with CRRC runs deeper than just the company’s ties to the Chinese military. According to Adams, the Chinese-made trains are outfitted with Wi-Fi systems and surveillance cameras that could be exploited by Beijing.

“Chinese-built-in surveillance cameras could track the movements and routines of passengers, searching for high-value targets that intelligence officials can then identify to vacuum data from using the train’s built-in Wi-Fi systems,” Adams said.

The country’s rails, totaling over 140,000 miles in length, connect to every major American city and every major U.S. military base, which is a huge national security concern, according to Adams.

“Chinese penetration of the rail system’s cyber-structure would provide early and reliable warning of U.S. military mobilization and logistical preparations for conflict,” he said.

Economically speaking, if Beijing gets access to data about the logistical movement of U.S. rail cargo, that could be “a destabilizing economic competitive edge.”

What’s more, Adams pointed out, freight rail is the main way that U.S. nuclear waste and hazardous material are transported.

Chinese access to U.S. freight rail technology could mean the risk of intrusions, such as tampering with rail service valves, which could lead to accidental spillage of toxic chemicals such as nuclear waste carried by freight cars, killing American people.