CAIXINMEDIA

Mexican Lessons For China After High-Speed Rail Deal Collapses

High-speed railway in construction in Shenzhen, China.
High-speed railway in construction in Shenzhen, China.
Tao Jingzhou

BEIJING — The Mexican government announced Nov. 4 that it had awarded its first high-speed rail contract to a Chinese-led consortium. But as the exciting news was still buzzing in the Chinese press, Mexican President Enrique Pena Nieto suddenly canceled the deal five days later.

As the media later reported, the consortium led by China Railway Construction Corp. was the only bidder, and it includes a Mexican firm said to be very close to President Nieto. Opposition parties vigorously questioned the legality and transparence of the bidding process, saying they suspected corruption.

Meanwhile, shocked by the Mexican government's capricious behavior, many in China are outraged by Mexico's backtracking. The Mexican government has actively taken the initiative to grant the consortium a compensation fee equivalent to 1% of the original construction deal. But it will probably never be known whether the payment stems from legal considerations or from political blame.

In any case, it's true that certain parts of the original deal are truly puzzling.

Consider first the bidding deadline. To win the bid, China Railway Construction Corp. formed a team of 400 people to work night and day for two months. The deadline was so extreme that some of the time they slept in the office. Meanwhile, 16 potential rivals — including Japan's Mitsubishi, France's Alstom, Canada's Bombardier and Germany's Siemens — all abandoned the bidding because of the tight timing.

So how was it possible for the Chinese consortium to develop its bid for such a huge project in just two months? Evaluation of the project's feasibility and the environmental impact study couldn't have been conducted properly in such haste. China Railway Construction Corp. is another example of a Chinese company that ultimately pays for its greedy and hasty overseas contracts.

Moreover, the Mexican government said that it put the work out to bid last November, which contradicts the consortium's claim that it has been working on the project since last September. Does this incongruity hint, as Mexico's opposition parties claim, that the Chinese-led consortium does have improper relations with President Nieto? It's very common for Chinese companies to use personal connections, because they are convinced that projects can't succeed without bribing people. Though there is historical cause for this psychology, it is outdated in today's business climate.

Fall in line, China

China has been cracking down vigorously on corruption in recent years, and there has been parallel anti-corruption momentum in international business circles. Several anti-corruption conventions and practices were promulgated by the UN, the International Chamber of Commerce, the OECD and the G20, and these have been consistently strengthened by member countries. Chinese companies would do well to conform to this trend and enforce enterprise compliance management.

Also curious in this case is the rail project's estimated construction cost. According to the consortium's announcement, the contract project amounts to $4.4 billion, with operations and maintenance accounting for $660 million. Suppose the Chinese company wouldn't have pocketed a penny and invested the total of $3.74 billion into building the 210-kilometer high-speed rail system. That would mean a per-kilometer cost of $18 million. That is roughly half of the building cost in China, where rail costs $33 million per kilometer.

The consortium explained this difference by saying domestic rail costs $33 million per kilometer because it is built to run at a speed of 350 kilometers per hour. The Mexican rail project was planned to run at just 300 kilometers per hour, somehow making the cost lower.

It's common practice for Chinese companies who want to expand overseas to bid low just to win a contract first, then to carry out price increases through contractual adjustments. In Africa or Southeast Asia, where legal awareness is low and press freedoms are minimal, this may work. But in the West or even in Russia, Brazil and Mexico, this is a risky strategy.

China Railway Construction’s light rail project in Mecca, Saudi Arabia, three years ago illustrated this well. I have personally encountered quite a few of clients who fell into this kind of trap, and they regretted it bitterly.

When Chinese companies encounter a setback, they tend to resort to the government's help. They try to fall back on the two countries' political relationship, but many companies still end up paying a huge cost for this misjudgment.

In the end, it is perhaps not such a bad thing that Mexico revoked the rail contract. It will give China's companies something to think about.

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Society

What It Means When The Jews Of Germany No Longer Feel Safe

A neo-Nazi has been buried in the former grave of a Jewish musicologist Max Friedlaender – not an oversight, but a deliberate provocation. This is just one more example of antisemitism on the rise in Germany, and society's inability to respond.

At a protest against antisemitism in Berlin

Eva Marie Kogel

-Essay-

BERLIN — If you want to check the state of your society, there's a simple test: as the U.S. High Commissioner for Germany, John Jay McCloy, said in 1949, the touchstone for a democracy is the well-being of Jews. This litmus test is still relevant today. And it seems Germany would not pass.


Incidents are piling up. Most recently, groups of neo-Nazis from across the country traveled to a church near Berlin for the funeral of a well-known far-right figure. He was buried in the former grave of Jewish musicologist Max Friedlaender, a gravesite chosen deliberately by the right-wing extremists.

The incident at the cemetery

They intentionally chose a Jewish grave as an act of provocation, trying to gain maximum publicity for this act of desecration. And the cemetery authorities at the graveyard in Stahnsdorf fell for it. The church issued an immediate apology, calling it a "terrible mistake" and saying they "must immediately see whether and what we can undo."

There are so many incidents that get little to no media attention.

It's unfathomable that this burial was allowed to take place at all, but now the cemetery authorities need to make a decision quickly about how to put things right. Otherwise, the grave may well become a pilgrimage site for Holocaust deniers and antisemites.

The incident has garnered attention in the international press and it will live long in the memory. Like the case of singer-songwriter Gil Ofarim, who recently claimed he was subjected to antisemitic abuse at a hotel in Leipzig. Details of the crime are still being investigated. But there are so many other incidents that get little to no media attention.

Photo of the grave of Jewish musicologist Max Friedlaender

The grave of Jewish musicologist Max Friedlaender

Jens Kalaene/dpa/ZUMA

Crimes against Jews are rising

Across all parts of society, antisemitism is on the rise. Until a few years ago, Jewish life was seen as an accepted part of German society. Since the attack on the synagogue in Halle in 2019, the picture has changed: it was a bitter reminder that right-wing terror against Jewish people has a long, unbroken history in Germany.

Stories have abounded about the coronavirus crisis being a Jewish conspiracy; meanwhile, Muslim antisemitism is becoming louder and more forceful. The anti-Israel boycott movement BDS rears its head in every debate on antisemitism, just as left-wing or post-colonial thinking are part of every discussion.

Jewish life needs to be allowed to step out of the shadows.

Since 2015, the number of antisemitic crimes recorded has risen by about a third, to 2,350. But victims only report around 20% of cases. Some choose not to because they've had bad experiences with the police, others because they're afraid of the perpetrators, and still others because they just want to put it behind them. Victims clearly hold out little hope of useful reaction from the state – so crimes go unreported.

And the reality of Jewish life in Germany is a dark one. Sociologists say that Jewish children are living out their "identity under siege." What impact does it have on them when they can only go to nursery under police protection? Or when they hear Holocaust jokes at school?

Germany needs to take its antisemitism seriously

This shows that the country of commemorative services and "stumbling blocks" placed in sidewalks as a memorial to victims of the Nazis has lost its moral compass. To make it point true north again, antisemitism needs to be documented from the perspective of those affected, making it visible to the non-Jewish population. And Jewish life needs to be allowed to step out of the shadows.

That is the first thing. The second is that we need to talk about specifically German forms of antisemitism. For example, the fact that in no other EU country are Jewish people so often confronted about the Israeli government's policies (according to a survey, 41% of German Jews have experienced this, while the EU average is 28%). Projecting the old antisemitism onto the state of Israel offers people a more comfortable target for their arguments.

Our society needs to have more conversations about antisemitism. The test of German democracy, as McCloy called it, starts with taking these concerns seriously and talking about them. We need to have these conversations because it affects all of us. It's about saving our democracy. Before it's too late.

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