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Cover Stories Series 2014> Reform Initiatives Underway for 2015> Retrospect> Opinion
UPDATED: November 2, 2014 NO. 45, NOVEMBER 6, 2014
On Track for Success

Transport authorities in Massachusetts recently awarded China CNR Corp. Ltd. (CNR) a contract to supply 284 trains for the city of Boston's subway system, the first time that a Chinese railway transportation equipment maker has won a worldwide bid in the United States.

Made-in-China subway trains have ploughed full steam ahead into the U.S. market, marking a historical milestone for Chinese industry. This not only evidences the competitive advantage of these trains in the global market, but also epitomizes the upgrading of the country's manufacturing sector. This order will not only further increase exports of subway trains made in China, but will also lift the exports of Chinese-made rail products, such as high-speed trains.

As one of the world's top markets, the U.S. market is very demanding in terms of technology, quality and cost performance ratio. Earlier this year, China CSR Corp. Ltd. (CSR) exported subway train components to the United States. Now, CNR have made even further progress by selling full subway trains to the United States. These success stories will give confidence to subway train makers and other exporters in the country.

So what can we learn from CNR's recent victory?

First, in order to enter the top market, Chinese products should start with smaller markets. Exports of subway trains to India and France had already won a global reputation for made-in-China rail products prior to the U.S. deal. After accumulating experience in cooperating with other countries, Chinese companies' goals of marching into the U.S. market have become far more attainable.

Second, the matter underlines the importance of focusing on clients' demands and offering customized products. CNR had had its eyes on the bidding for Boston's subway system since 2010. This kind of perseverance makes a great difference. In addition, the company studied client demands in technology, standards, norms and laws and then offered customized services by adopting U.S. standards in structural strength and control security. When these measures are taken into account, winning the order seems a natural outcome.

Whether or not made-in-China goods can break top markets depends on three factors—focusing on target markets, thoroughly studying clients' wants and needs, and finally, offering specifically tailored products and services. Above all, a company's competitiveness is vital to winning an overseas bid. CNR has many advantages, which together make up the key to its success.

Despite the recent hard-earned victory, China's railway transportation equipment makers still face many challenges. Over 10 urban railway systems need to be upgraded in New York and Philadelphia but emerging victorious in the bidding processes represents no easy task. The competitors for the bid include global heavyweights such as GE, Alstom, Bombardier, Siemens and Kawasaki. Compared with them, both CNR and CSR enjoy limited shares in the global market. Therefore, the new order in Boston should be used as an opportunity to expand the competitiveness of Chinese companies.

Another problem is cutthroat competition among Chinese companies in overseas bidding. According to media reports, CNR and CSR will soon merge to compete globally, putting an end to the days when the two fought tooth and nail against each other for foreign contracts. But that kind of vicious competition may still take place among other Chinese companies. Such companies should therefore avoid self-defeating competition in overseas bidding.

China has kissed its "demographic bonus" period goodbye. The low-price strategy in the global market has become an obsolete mindset. The improvement in the global status of made-in-China products will inevitably depend on both quality goods and technological innovation.

This is an edited excerpt from an article published in Securities Times

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