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China offers to finance and build rail links to HS2

Mark Odell and Jim Pickard
Wednesday, 8 Jan 2014 | 9:18 PM ET

China has offered to invest in Britain's railways for the first time by financing and building links to a new Birmingham station on the high-speed HS2 network, highlighting Beijing's growing interest in investing in UK infrastructure.

The move highlights Beijing's growing interest in investing in UK infrastructure.

(Read more: Here's how bad China's bad loan problem could get)

The approach by China Railway Group came within weeks of David Cameron's trip to China, when Li Keqiang, the Chinese premier, offered to invest directly in the government's £50 billion high-speed rail line.

Simon Taylor | Flickr Vision | Getty Images

Premier Li's offer took Downing Street by surprise and British officials insisted that the main rail line will be funded entirely by the taxpayer. But officials held open the prospect of Chinese companies bidding for the concession to run the line once it was built and said they would welcome direct investment in stations and other ancillary projects around HS2.

Ministers are promoting HS2 as a project that can establish the UK as a world-leader in high-speed rail engineering and so are sensitive to the fact that Beijing's offers to finance infrastructure in other countries have often been contingent on awarding building contracts to Chinese companies.

In a letter to the leader of Birmingham city council last month, China Railway Group offered to build connections from the proposed HS2 interchange on Birmingham's eastern outskirts to the airport and cities such as Coventry and Peterborough.

(Read more: China's $3 trillion local government debt stirs alarm)

China Railway Group is a Hong Kong-listed subsidiary of the state-owned China Railway Engineering Corporation and has been instrumental in leading the modernization of the country's domestic rail network.

An official in China Railway Group's international department confirmed the company's interest in the project, which has been valued at £240 million by its other backers.

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Mr Cameron has welcomed Chinese investment into UK infrastructure, including Heathrow airport, a nuclear power station in western England and Manchester airport. Britain has jumped from 21st in the list of China's inward investment destinations in 2010 to fourth.

The rail project that has attracted Chinese interest is a proposal put forward six months ago by two local Midlands' businessmen that would involve reopening a railway line closed in the 1930s and building a direct rail shuttle link to the airport.

(Read more: Britain to give all-clear to Huawei security center)

The link between the Birmingham Interchange station and the airport is designed to allow passengers to check in at the rail station and travel direct to their boarding gate. The current HS2 proposal would link the airport via the National Exhibition Center with no pre-check-in facilities.

"This proposal would give you better access to Birmingham airport and to HS2 to towns to the north and east of the city," said Alan Marshall, editorial director of Railnews, a trade publication, and one of the backers of the project.

More from the Financial Times:

Cameron opens door to China role in HS2
Chinese business investors flock to UK
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Paul Kehoe, chief executive of Birmingham airport, confirmed that he had also been approached by China Railway. "Large infrastructure projects, like HS2, put a large dent in the public purse, so I'm sure the government would welcome such an investment", he said.

A leading UK transport think-tank said last year HS2 would work as a catalyst to regional development only if it was accompanied by smaller schemes to boost local transport links.

The Department for Transport said it had held initial talks with the backers of the Birmingham scheme but had not been approached directly by the Chinese.

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