The study’s findings are based on Australia’s experience from the shift of its railcar production to China. Beijing-backed firms can borrow money far below the market rate and receive large subsidies, allowing them to sell products more cheaply than the going price in other countries.
A strong Australian dollar reduced the country’s manufacturing competitiveness, and increasingly free trade with China allowed the Beijing-backed companies to take a greater share of Australia’s freight railcar production, the report said.
“In under 10 years, all Australian manufacturers have largely ceased production or have gone out of business. The remaining producer, Bradken, has largely exited the Australian market,” the Oxford Economics study said.
The blue-shaded areas represent Australian firms, while the red represents merged Chinese state interests.
Source: Oxford Economics, data compilation by German transportation consultancy SCI Verkehr on behalf of Amsted Rail
“In the U.S. freight railcar market, the potential for disruption and loss to the U.S. economy may be even more acute than in Australia, especially given the larger size of U.S. freight railcar demand,” the report said. The analysis projects a loss of up to $6.5 billion in U.S. gross domestic product.
Some members of Congress are already concerned about the Chinese threat to U.S. freight manufacturing and jobs.
Chinese rail projects in the U.S. so far have typically focused on U.S. government-backed passenger rail. Under “Buy America” legislation, foreign companies that win contracts for federally funded projects must use some U.S. materials and build U.S. production plants.
“Buy America does not apply to all U.S. rail projects, and the U.S. freight manufacturing industry is particularly vulnerable, as it does not enjoy Buy America’s protections,” analyst Michelle Ker wrote in a February report form the U.S.-China Economic and Security Review Commission.
That said, not all Chinese investment hurts U.S. workers. Chinese-owned companies added about 50,000 U.S. employees last year, for a total of more than 140,000 American workers, according to consulting firm the Rhodium Group.