Strukton Rail Making Inroads into China

For many China is far-removed from their own reality. And many just recently started to realize that the country is no longer lagging behind: streets in China are crowded by cars, not workers riding their bicycle in in Mao suits; China is becoming a developed country. Now I have been living in China for twelve years, I see the country move forward in great leaps. Just look at infrastructure: the country has no less than 200 (two hundred!) cities with one million residents or more. Many of these cities do not yet have opened metro or light rail systems and traffic jams are a continuous headache. The Chinese government is aware and is investing heavily in public transportation and facilities. It has approved plans for metro construction in 43 cities spanning a total of 8,000 kilometres of track and rolling out over 5,000 metro cars per year. This offers Strukton Rail tremendous opportunities.

Eight new metro lines

One of these opportunities is in Jinan, the rapidly developing capital of Shandong Province which boasts 10 million residents. Eight new metro lines are being planned for construction inside and surrounding the city spanning a total length of 275 kilometres and 176 stations. Work for which Strukton Rail is eminently suited. Because it is difficult for foreign companies to enter Chinese markets “from scratch”, Strukton Rail has chosen the joint venture approach. In 2017, Strukton Rail together with SICC, a producer of semi-conductor materials, and state-owned enterprise Jinan Metro created the joint venture Shandong SRCC Rail Transport Technology Co. Ltd. for which I was appointed General Manager. Strukton Rail holds 45% of the shares, Jinan Metro 40% and SICC 15%. Strukton Rolling Stock supplies the technical knowledge and designs and produces components for the traction and auxiliary power supply systems. SICC provides facilities for the production and assembly of the systems, as well as local market knowledge and government relationships. Leveraging Strukton Rail’s knowledge and expertise, the objective is for SRCC to eventually operate independently serving the Chinese market. 

“The Chinese government has approved metro plans for 43 cities”

Win-Win-Win

Does this joint venture sound like business as usual? It is anything but. The fact that Strukton Rail managed to get a joint venture up and running partnering with a Chinese state-owned enterprise is a major accomplishment. It requires excellent contacts with local government and a lot of patience. The second success since the creation of the joint venture is the fact that with the help of Jinan Metro, we were able to acquire a project early on: Strukton Rolling Stock will be supplying the auxiliary power supply systems for the R2 driverless metro line in Jinan. 
The joint venture is what you would call a win-win-win cooperation. It will enable SICC to increase its production over time, allow the City of Jinan to acquire foreign technology and investments and help Strukton to expand its market for its unique niche technology. For Strukton Rail, the joint venture is the gateway to China, where, if things go well, it will become an important supplier for state of the art products and services for Jinan Metro, which controls all public rail infrastructure and transport with metro, light rail, train and the high-speed lines. I also expect Strukton Rail to expand beyond traction and auxiliary power supply systems, landing opportunities for Strukton Rails’ Smart Maintenance and Asset Management products and services.

The China Virus

Plenty of opportunities ahead therefore, but Strukton Rail still has work to do by building references. And that’s not that easy. Firstly, because doing business in China is very different from doing business in Europe. The pace is relentlessly high: deadlines are deadlines, and to meet these deadlines the Chinese simply work overtime including weekends. Europeans often are not used to this pace and projects might take longer than planned. In China you might run the risk of being cast aside. Another difference between Dutch and Chinese thinking is how they set priorities. The Chinese have a grand vision and are prepared to do what it takes to achieve that vision, for example by significantly investing in pilots and trials. They expect business partners to adopt the same view, while the Dutch often are more cautious and cost-conscious. Fortunately, I can explain one party’s position to the other as a means of bridging cultural differences. What I often tell Strukton colleagues is that the Chinese never give up. After all, in China there are many problems, but there are even more solutions! The Chinese solve today’s issues and tomorrow they’ll figure out how to proceed from there. They are entrepreneurial and focused on progress. There is tremendous energy and I hope that Strukton staff, just like me, will somehow become “infected” with the China virus.