Is California Betting on Asia?

Anthony Pignataro: Given the brief press release issued by California High-Speed Rail Authority Executive Director Roelof van Ark following last week’s big trip to Asia, it’s clear he didn’t get everything he’d hoped for. I’m saying this because hope is the dominant theme in his statement:

“I am more convinced than ever that private investors see the tremendous potential in California’s system and more confident that we will generate the international competition necessary to get the best deal for California taxpayers,” van Ark said in the Sept. 17 release. “While we are several steps in our development away from requesting such funding, I know that private investment in California’s system will materialize at the appropriate point in our project’s development.”

Private investment is the key to California’s bullet train dream — without it, and the trains never leave the station because there is no station (or train or tracks, for that matter). But assurances from the director that private will “materialize” (as though out of thin air, which is probably not the best analogy given this January LAO report that’s sharply critical of the rail authority’s funding dreams) are not all that assuring these days.

Governor Arnold Schwarzenegger seemed to have better luck. Though his post-trip press release was kind of cagey on the subject of high-speed rail, saying simply that Japan, China and South Korea “expressed their strong interest” in the state’s rail project, he does seem to have secured an as-yet unspecified rail loan from Japan.

“The state-owned Japan Bank for International Cooperation is prepared to lend funds, Japan’s Transport Minister Seiji Maehara told reporters last week in Tokyo after meeting with California Governor Arnold Schwarzenegger,” Bloomberg News reported on Sept. 19. “He declined to comment on the amount of the possible loan.”

Schwarzenegger seems to be betting that Asia can provide the money and support his bullet train plan desperately needs. And there is precedent for this — Germany, for instance, is racing out of the global recession on the back of China.

“Vilified in the United States as a great sucking sound on the American economy, China is courted here as a revered client,” The Washington Post reported on Sept. 18. “Fast-growing demand from Asia’s giant is helping fuel the strong German recovery, and Germany now stands as proof that a rich nation can profit off China’s rise.”

Germany is unquestionably doing well — unemployment there is less than eight percent! But if this is Schwarzenegger’s plan, then he’s taking a risk. As the Post pointed out, German “overdependence” on China could really hurt if Asia starts to cool off. Then again, Schwarzenegger will be gone in a few months, so the risk to him personally is probably minor.

-Posted Sept. 20, 2010