Government Issues

House passes bill banning usage of Fed funds for Chinese rolling stock

Posted on July 12, 2019 by Alex Roman, Managing Editor

During a October 2017 media event, dignitaries took a ride on one of the four pilot cars to be sent to Boston for testing. Photo: CRRC
During a October 2017 media event, dignitaries took a ride on one of the four pilot cars to be sent to Boston for testing. Photo: CRRC

The House voted to pass H.R. 2500, the National Defense Authorization Act (NDAA) for Fiscal Year 2020. In the bill’s base text was a provision blocking federal transit dollars for procurement of electric railcars from Chinese State Owned Enterprises (SOEs), and other state-supported companies, originally introduced in the Senate by Sen. John Cornyn (R-TX), and the House by Rep. Harley Rouda (D-CA), as part of the Transit Infrastructure Vehicle Security Act (TIVSA).

“China’s ‘Made in China 2025’ initiative is an unmistakable effort to harm American manufacturers by subsidizing Chinese rail and bus industries,” said Rep. Rouda. “Chinese companies misrepresent themselves as benevolent actors, but let’s be clear: this is an attack on our economy and national security.”

Specifically, the provision prohibits financial assistance to be used in awarding a contract or subcontract to an entity for the procurement of rail rolling stock for use in public transportation if the manufacturer is owned, controlled by, or legally or financially related to corporations under certain conditions identified in the bill that designate the corporation to be a state-sponsored or owned enterprise located in adversarial non-market economies like China.

According to the bill’s authors, the Chinese government continues to use a range of state subsidies and predatory practices to support its market ascension in certain sectors of this country’s economy. Two of these sectors, rail manufacturing and bus manufacturing, are included as part of China’s “Made in China 2025” initiative, a plan targeting global dominance in areas that the Chinese government considers most strategic to its global aims.

The authors also assert that Chinese state-owned and state-supported enterprises have used subsidized “bargain prices” well-below competitive market price to win contracts throughout the U.S., with a number of large, metropolitan areas having recently awarded rail rolling stock procurements to a Chinese state-owned enterprise. They believe there are a number of threats these procurements pose, including impeding economic competitiveness and overtaking the supply chains that support U.S. public transportation agencies. Finally, it is believed that Chinese state-owned and state-supported enterprises have increased security vulnerabilities and create new risks for rolling stock procurements.

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