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BloombergBusinessweek October 7, 2019T
heconcretefloorsshineinthenew$100million
factoryonChicago’sfarSouthSide.Towering
shelvespaintedinblue,yellow,andredaremostly
empty.Thequietiseerie,punctuatedonlybya
forklift’soccasionalbeep.
Ona bankof6-foot-highplatformsrestthesteelshellsof
five48-foot-longpassengerrailcarsdestinedfortheChicago
TransitAuthority.Insidethecars,clutchesofworkerstrace
multicoloredbundlesofwire.Outside,othersinsafetyhel-
metsandglassesattachHVACequipmenttotheundercar-
riages.AllworkfortheChicagosubsidiaryofChinaRailway
RollingStockCorp.Andwhatthey’redoingscaresthehell
outofsomeU.S.manufacturersandWashingtonpoliticians.
CRRCis theworld’slargestmakeroffreightandpassenger
railcars.Overthepastdecade,thestate-ownedChinesecom-
panyhasgonefromcountrytocountryunderbiddingrivals
andtakingbusinessfromgiantssuchasAlstom,Bombardier,
Siemens,andHyundai’srailunit,Rotem.WhenSiemensand
Alstomtriedtomergetwoyearsago,beforebeingblockedby
EuropeanUnionregulators,theycitedtheCRRCjuggernaut
asonerationale.TheChinesecompanyeffectivelywipedout
Australia’shomegrownrail
carindustryinlessthana
decade.Earlyin2018,CRRC
declaredina since-deleted
tweet,“Sofar,83%ofallrail
productsin the worldare
operated by #CRRCorare
CRRCones.Howlongwillit
takeforusconqueringthe
remaining17%?”
Since2014,CRRChaswon$2.6billionincontractstosup-
plysubwaycarstotransitauthoritiesinBoston,Chicago,Los
Angeles,andPhiladelphia.TheChicagofactoryandanother
inSpringfield,Mass.,alongwitha parts-makingfacilityin
LosAngeles,collectivelyemployabout365—includingmore
than 150 unionmembersearningasmuchas$32anhour—
andplantoadddozensmore.InChicago,productionman-
agerBrianVasquezstrollsthefloorpointingoutemptyareas
wherehisfacilityintendstoexpandinto,amongotherthings,
double-decker commuter cars. “It kind of looks like overkill,”
Vasquez says, “but CRRC is preparing for the future.”
That future is uncertain, in no small measure because
of the dysfunctional relationship between the U.S. and
China. This is how fraught things are: In a Congress where
it’s almost impossible to get anything significant done, four
U.S. companies in the freight car business have persuaded
the House and Senate to pass legislation that would withhold
federal funds for any municipal project using CRRC cars.
CRRC’s antagonists echo the Trump administration’s
harangues against Huawei Technologies Co. and ZTE Corp.
They argue that CRRC will use its advantages as a subsidized
company to dominate not only the U.S. passenger rail indus-
try but also, eventually, the larger freight car business. They
say, too, that China will use CRRC rail cars for espionage, aneconomic and military security concern. Lawmakers from
both parties have embraced these arguments, though there’s
clearer evidence for the former than the latter.
In either case, if you’d like Washington to help you kneecap
a Chinese rival, now is a good time. FBI Director Christopher
Wraytolda congressionalhearinginJulythat“thereis nocoun-
trythatposesa moreseverecounterintelligencethreattothis
countryrightnowthanChina,”accusing it of trying “to steal
their way up the economic ladder at our expense.”
Lobbyist Erik Olson of the Rail Security Alliance, which
represents the four domestic freight car companies, says it’s
perilous to give CRRC any benefit of the doubt. “You can’t
mitigate against the threat,” Olson says. “You have to choose
risk avoidance: Don’t buy the train in the first place.”O
n a sunnyMarchdayin2017,then-MayorRahm
Emanuelplungeda shinysilvershovelintoa
moundof dirt 20 miles south of downtown
Chicago. He, along with a few other local politi-
cians and CRRC officials, was breaking ground for the factory.
It was going up in the blue-collar Hegewisch neighborhood
on a 45-acre site near a Ford Motor Co. plant, a United Auto
Workers hall, and a couple of beer-and-shot joints.
The project promised the community 170 jobs and the
renewal of an industry that had disappeared when the last
rail car shop closed in the early 1980s. “Four years from
now, Chicagoans like myself will be commuting on a rail car
made in Chicago by Chicagoans,” Emanuel said. That the
plant would be built by a company based in Beijing didn’t
seem to matter.
No U.S. companies make passenger rail cars. That’s
partly because Americans don’t travel on trains nearly as
much as they do in automobiles. Most of the companies
that make passenger rail cars for the U.S. hail from coun-
tries where personal train travel is more common: Alstom
(France), Hyundai Rotem (South Korea), Kawasaki ( Japan),
and Siemens (Germany).
And CRRC. The company dates to 1881, when Xugezhuang
Machinery Works built China’s first steam locomotive, nick-
named “Rocket of China.” Today, CRRC is effectively a sub-
sidiary of the People’s Republic, with more than 180,000
employees working at more than 40 subsidiaries around the
world.Thecurrentversionofthecompanywasformedby
themergeroftwohugemakersofrailgearin2015,thesame
yearthenationalgovernmentissueditsMadeinChina 2025
policy. That initiative listed 10 industries in which China seeks
to become a global power. No. 5 is advanced rail equipment.
China has tried to mute its ambitious tone as the trade war has
heated up, but a recent report from the Berlin-based Mercator
Institute for China Studies said the country “has not at all
abandoned its economic—and strategic—goal of catching up
withWesternindustrializedcountriesandgaininga compet-
itiveedgeinhigh-techandemergingtechnologies.”
CRRCposteda profitof$1.5billionlastyearonrevenueof
$33.1billion. It landed its first U.S. contract in Boston five years XINHUA/ALAMYBreaking ground for the Chicago factory