China's plan to connect Asia with high-speed rail is running into trouble due to delays and debts, giving rival Japan an opening to expand its influence. The Indonesian Whoosh bullet train, financed 75% by Chinese loans, has become a case study on the risks of the Chinese model with lower-than-expected passenger traffic and high operating costs. Japan is poised to deepen regional ties by offering quality infrastructure and trusted capital, with future projects in Vietnam, the Philippines, and a potential tie-up between Singapore and Malaysia up for grabs. Their competition is about far more than trains. It’s about how future economic power will evolve across the Indo-Pacific. With each new railway line comes years of debt repayments, maintenance contracts and training that bind countries to each other.grand plan to connect Asia with high-speed rail was meant to highlight the superiority of its state-led modernization. But as delays mount and debts pile up, Beijing’s rail diplomacy is running into trouble. That gives rival Japan — a key US ally — an opening it hasn’t enjoyed in years. Their competition is about far more than trains. It’s about how future economic power will evolve across the Indo-Pacific. With each new railway line comes years of debt repayments, maintenance contracts and training that bind countries to each other. BloombergOpinion UBS Boss Scores One for Banks Over Private Credit Private Equity Must Sell More Assets — at Whatever Price Europe Is Heading Toward Budgetary Ruin The AI Bubble Has Sucked in France and Germany, Too The most recent example is Indonesia’s Whoosh bullet train. Launched in 2023 as Southeast Asia’s first high-speed line, it links the capital, Jakarta, to the third-largest city, Bandung. The line cost about $7.2 billion, and is 75% financed by Chinese loans. It was initially targeted for completion in 2019, but was held up by years of delays and a cost overrun of more than $1 billion. The project was once hailed as a symbol of closer ties between Beijing and Jakarta. Now it has become a case study on the risks of the Chinese model. With lower-than-expected passenger traffic and high operating costs, the local consortium — which owns 60% — reported multimillion dollar losses last year. The Indonesian government is now opening debt-restructuring talks with China. It’s a cautionary tale of what can go wrong when China gets involved. Back in 2015, Beijing and Tokyo both bid for the project, and even though Japan offered cheaper loans, Indonesia went with China. A decade later, many in Jakarta will be asking if that was the right call. There’s no doubt that China has real appeal, mainly because it delivers everything from financing to construction and technological support in one package. “No one else can offer the same integrated solutions China can,” says Christoph Nedopil, director of the Brisbane-based Griffith Asia Institute. Beijing’s overseas railway ambitions mirror the progress at home. Between 2008 and 2019, the world’s second-largest economy built an average of 5,464 kilometers (3,395 miles) of track per year — almost equivalent to the distance between New York City and London, according to the Center for Strategic and International Studies China Power Project. Roughly half of that was high-speed rail, making its network the largest in the world. But the liabilities are mounting. Opaque contracts, overly optimistic projections and political tensions have plagued projects from Southeast Asia to Africa. In Thailand and Malaysia, Chinese high-speed rail links were renegotiated after concerns about debt traps and corruption. In the Philippines, three Chinese-financed initiatives were cancelled in 2023 against the backdrop of souring ties over the South China Sea. From Nigeria’s $823 million light rail project to Sri Lanka’s debt-driven default, the dangers of Beijing’s lending are becoming impossible to ignore. Developing nations are now paying more to service debt owed to China than they receive in new loans, a recent report by Boston University’s Global Development Policy Center found. All of this gives Japan an opening. Tokyo pioneered high-speed rail with the iconic Shinkansen in 1964, and is now building the 508 kilometer Mumbai-Ahmedabad corridor in India. The Japanese government agreed to finance 81% of the $17 billion needed with ultra-low interest rates. The long-term partnership between New Delhi and Tokyo, two large and powerful democracies, is a welcome example of how nations allied with Washington can join forces to blunt Beijing’s influence. India will become the second place to use Japanese bullet-train technology after Taiwan. Get the Morning & Evening Briefing Americas newsletters. Start every morning with what you need to know followed by context and analysis on news of the day each evening. Plus, Bloomberg Weekend. By continuing, I agree to the Privacy Policy and Terms of Service. Tokyo should resist the temptation to mimic Beijing’s lower-cost approach. Its strength lies in providing quality infrastructure and trusted capital. By offering packages that include maintenance, technology transfer and reliability, Japan can deepen regional ties. Future projects in Vietnam, the Philippines and a potential tie-up between Singapore and Malaysia are up for grabs and offer fertile ground for Tokyo to step in. From 2020 to 2035, experts estimate that about one-third of all railway expansion in Asia will consist of high-speed trains. Whoever wins these contracts will determine the standards and financing that will shape the region’s growth for years to come. More From Bloomberg Opinion: China Is Testing American Resolve in the Trade War: Karishma Vaswani UK Effort to Replicate Japan’s High-Speed Rail Fell Short on Grit: Gearoid Reidy Why Can’t Britain and the US Build? China Has an Answer: Matthew Brooker
