The project is dogged
by mis-steps, doubts, and shrinking political
support. It is assumed that, if the bond
referendum were held today, it would not pass. The
California state legislature is hesitant to issue
the first $2.7 billion in bonds. If they delay and
construction does not begin this summer, the
federal funds will likely evaporate.
It
would also appear that China would not score any
white knight points if it considered stepping up
and helping California in its difficulties.
China's best known calling card in the
field of high-speed rail is now the horrible
collision in Wenzhou on July 21, 2011, which
killed 40 people. The crash was widely reported in
the West as
China's comeuppance for
corruption, haste, and shoddy goods, and evidence
against the idea that "China can do infrastructure
better".
Critics of high-speed rail and
Chinese involvement acidly pointed out that
China's railway ministry already has a presence in
Los Angeles. Its former chief engineer had somehow
managed to purchase a million dollar mansion in LA
on his monthly salary of a $264 back in China. [9]
Currently, hostility to China, its
authoritarian system of government, and its
perceived role as a thief of American jobs and
technology is pretty much baked into the US
political system thanks to strenuous efforts by
both Democrats and Republicans.
High-speed
is, by itself, also a political third rail, having
become highly politicized. Beyond the issue of
questionable economics, the drive to discredit and
defeat high-speed rail derives its energy from
partisan desire to repudiate the Barack Obama
administration's policies promoting
government-directed stimulus and infrastructure
investment.
Collapse of California's
high-speed rail project would be welcomed by his
enemies as a defeat for President Obama and his
agenda. His agenda, depending on the fervor of his
enemies, is either socialism, communism, or
Satanism ... or Agenda 21.
In the
mainstream, Agenda 21 is a toothless United
Nations environmental initiative for sustainable
development. For the Tea Party fringe, it is a
conspiracy staple: a UN-created, George
Soros-funded plan for leftists in the government
to destroy freedom and private property by setting
up a chain of gulags along passenger rail lines
full of bike paths and clean air but no cars or
liberty.
Enamored of the energy of the Tea
Party, the Republican leadership, especially Newt
Gingrich, and Fox News have flirted with
legitimizing Agenda 21. Agenda 21 Cassandras
figured prominently in the public outcry that
doomed the only high-speed rail project in the US
other than California's: the Florida HSR. [10]
Attitudes like this should dissuade Xi
Jinping that the PRC will be welcomed as the
savior of California's high-speed rail system:
Oooh baby ... High-speed rail owned
and operated by the Chinese throughout the US.
... Roads, sewer systems, and water systems will
be owned by the Chinese. ... I can see it now.
We lose our rural roads - pulverized to gravel.
Our private vehicle usage is limited,
restricted, and taxed. Our bus service will be
declared insolvent and not cost effective.
High-speed rail will be the only way to travel.
Fully owned and operated by the Chinese.
In our country. Airport-style searches.
Restricted use tickets. Overcrowding. Limited
line service. Why? Because we can't maintain our
own infrastructure? Can we maintain our
sovereignty? Just wondering. [11]
PRC
investment in California public rail, it is safe
to say, will not be welcomed as an act of public
philanthropy. Every aspect of Chinese
participation would become a magnet for scrutiny
and complaint.
This is probably the kind
of attention that China Investment Corporation
doesn't need. With a war chest of $400 billion or
so, CIC has the heft to make a serious investment
in a California high-speed rail project.
But CIC also got badly burned in its
previous forays into the US investment shark pool.
In 2007 CIC invested a combined $8 billion the
Blackstone Group and Morgan Stanley, just before
the derivatives hit the fan. The Blackstone shares
are now limping along at about half of what CIC
paid for them. CIC also took a bath on its Morgan
Stanley stock, having agreed to accept a
compulsory conversion of its privileged stake
(which paid a 9% dividend) to common equity in
2010 at a price twice the market value.
The fact that Mitsubishi UFJ invested $9
billion in Morgan Stanley on much better terms in
2008 did not sweeten the pill. According to
Caixin, CIC's solution was to buy another $1.2
billion of Morgan Stanley common stock, reducing
the aggregate cost of its holdings to $32 per
share. [12]
Today Morgan Stanley is
trading at $19 per share.
In addition, CIC
had put $5 billion into Reserve Primary Fund, a
gigantic money market fund that went off the cliff
with Lehman Brothers. CIC got its money back, most
of it anyway, after a year and some heated
representations to the US government.
The
big, bad bets CIC made, and its affinity for
consorting with Western capitalists, inspired
ferocious criticism back home, complete with dark
mutterings about the loyalty and probity of CIC's
team of young, liberal-minded technocrats. [13]
Politics and policy are a contact sport in
China, and one has to wonder if CIC has the
appetite to make a potentially lethal bet on
California high-speed rail, given the vast
uncertainties and risks associated with the
project. And if CIC or somebody like CIC doesn't
step up to form the core of an active, committed,
and capable consortium, it is difficult to see how
the California high-speed rail project will be
built.
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Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
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