China’s ambitions to become a top leader in the railway industry is threatening U.S. national security, according to industry experts and lawmakers.
Chinese rail manufacturers have been able to expand quickly globally due to Beijing’s government policies and heavy subsidies.
One company in particular, the state-owned rail car manufacturer China Railway Rolling Stock Corporation (CRRC), has racked up several contracts in major U.S. cities in recent years.
Concerned that the partnerships could pose security threats, a bipartisan group of U.S. senators recently sought to address the issue with new legislation.
The Transit Infrastructure Vehicle Security Act was introduced by U.S. Sens. John Cornyn (R-Texas) and Tammy Baldwin (D-Wisc.) on March 15, which would prohibit federal money from being used to award a procurement contract or subcontract for passenger rail cars and transit buses to Chinese state-owned, controlled, or subsidized enterprises, according to a press release from the office of Sen. Sherrod Brown (D-Ohio). Brown and his colleague Mike Crapo (R-Idaho) are co-sponsors of the legislation.
“China poses a clear and present danger to our national security and has already infiltrated our rail and bus manufacturing industries,” Cornyn said in the press release, arguing that the new legislation would help safeguard the U.S. transportation and infrastructure sectors.
Recent Deals
China’s CRRC succeeded in winning contracts in several major U.S. cities to supply rail cars. According to local news site Boston.com, CRRC was awarded an $843 million contract by the Massachusetts Bay Transportation Authority to assemble 404 subway cars in 2014.
Then, in March 2016, the Chicago transport authority contracted CRRC to build 846 rail cars for $1.3 billion, according to Reuters.
A year later, the Los Angeles County Metropolitan Transportation Authority awarded CRRC with a $647 million contract to supply 282 subway cars, according to Reuters.
Winning mass transit contracts is just the first step in China’s agenda to take over the U.S. freight rail sector, retired U.S. Brigadier General John Adams warned in a report he wrote for the U.S. industry group Rail Security Alliance in October last year.
“The Chinese government is banking on the fact that once CRRC secures sufficient U.S. municipal transit contracts, it can pivot quickly and inexpensively toward the more strategically important [U.S.] freight rail sector,” Adams wrote.
Freight railroads play a key role in U.S. military operations, such as transporting military equipment to their destinations. The report warned that Chinese-made rail cars would provide Beijing knowledge of “early and reliable warning of U.S. military mobilization,” based on information such as GPS train locations.
The new bill also seeks to improve cybersecurity within U.S. public transportation systems, such as by requiring any rail transit operator to develop and execute a plan for identifying and reducing cybersecurity risks.
State Support for Overseas Growth
CRRC’s aggressive push into the American market is tied to China’s state industrial policies.
Senator Baldwin explained in the press release about the new bill: “China has made clear its intent to dismantle U.S. railcar manufacturing in its ‘Made in China 2025’ plan—our economic and national security demands that we address Chinese attempts to dominate industries that build our nation’s critical infrastructure.”
Beijing rolled out “Made in China 2025” in May 2015, an industrial blueprint that envisions turning China into a manufacturing powerhouse in 10 tech sectors, including robotics, advanced information technology, advanced rail equipment, and aerospace.
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 policy goals.
CRRC is also a key feature of Beijing’s flagship foreign policy initiative, “One Belt, One Road.” According to the company’s website, Liu Hualong, who is both the firm’s chairman and the Communist Party secretary, has publicly stated his support for the initiative on several occasions.
“One Belt, One Road” (OBOR, also known as “Belt and Road”) is an investment initiative announced by Beijing in 2013, which aims to build up trade routes in Asia, Europe, and Africa through Chinese-financed infrastructure projects.
Under OBOR, CRRC signed a contract to provide rail cars for Pakistan’s 27-kilometer (16.7 miles) metro line, according to CRRC’s website. 27 trains were delivered in May 2017, according to Pakistani media reports.
According to a December 2018 article by Chinese state-run media China Daily, CRRC had 83 subsidiaries in 26 countries as of the end of 2017. 58 of the 83 were established after 2013, when OBOR was officially launched.
Domestic State Support
In recent years, CRRC also has been the beneficiary of many government subsidies. 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.
While there are no public figures for how much CRRC received in the years since, the company also has received government research subsidies. For instance, in 2017, CRRC Zhuzhou Locomotive, a subsidiary of CRRC, received 10 million yuan ($1.5 million) in subsidies from the central government for digitizing its rail traction system. A year later, the company received 9 million yuan ($1.3 million) in subsidies for developing underwater robotics and selfless driving system projects.
CRRC’s chairman Liu is also a high-level Party official. He is a member of the Central Commission for Discipline Inspection, the Communist Party’s internal anti-corruption watchdog.
According to the company’s website, the company has established over 160 central Party organizations and over 1,900 regional branches, with a total of over 85,000 Party members.
Cybersecurity Concerns
Cybersecurity risks in U.S. public transportation systems were the topic of a Congressional hearing in February 2019, where vice president of the Rail Security Alliance, Erik Olson, spoke of the potential threats.
Olson pointed to the case of a procurement proposal issued by the Washington Metropolitan Transit Authority (WMATA) in September last year, which sought the acquisition of new subway cars, video surveillance, monitoring and diagnostics, data interface with WMATA, and automatic train control systems—all of which are vulnerable to cyber attacks, according to Olson.
Given China’s history of cyber espionage and hacking, particularly targeting American businesses and government agencies, Olson stated that “We cannot trust a Chinese state-owned enterprise to build, own, or operate in U.S. critical infrastructure.”
An example would be the June 2015 cyber attack against the U.S. Office of Personnel Management, which breached the personal records of roughly 4.2 million current and former federal employees. The attack has been attributed to Chinese entities.
There are more than 140,000 miles of track running through every major American city, according to U.S. statistics.
“Without action, America’s industrial, military, and other government interests could be forced to rely significantly or wholly on rail cars made by the Chinese Government, thus creating massive cyber vulnerabilities that threaten our military and industrial security,” Olson warned.
In China, CRRC dominates 90 percent of China’s market for production of rail locomotives, bullet trains, passenger trains, and metro vehicles, according to Olson, citing a 2015 report by the South China Morning Post. Its rapid growth in the U.S. market can also be attributed to state-backed financing, Olson said.
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