Chinese Builders Help Hajj

Courtesy Tina Wang

Saudi Arabia awards multibillion-dollar railway contracts to consortiums including Chinese companies.

China may keep a tight leash on its own Muslims, but its railway companies are winning lucrative contracts in the Middle East to facilitate Islam’s most important pilgrimage.

Chinese contractors appear to have won over half of Saudi Arabia’s $5.2 billion spending plan to build railway links along the route of the Hajj. They’ll get more as Middle Eastern countries plow money into expanding the region’s rail network.

Chinese President Hu Jintao left Saudi Arabia on Thursday, with a $1.8 billion railway deal inked during his four-day trip. China Railway Construction Corp., a Saudi company and an undisclosed French firm will build a railway from Mecca to Medina that will run at speeds of 230 mph, cutting travel time to just half an hour, compared with a drive that typically takes several hours. The project is slated to be completed by 2013.

On Friday, China Railway Engineering Corp. was part of a consortium that won a $1.8 billion contract to build another Mecca-Medina rail link, going through the Red Sea port of Jeddah. Both rail projects should help ease traffic from the deluge of worshippers during the Hajj, the annual Islamic pilgrimage to the holy cities. Hundreds have been trampled to death due to stampedes in past years.

While the Mecca deal marks a big overseas contract for China Railway Construction, it is medium-scale compared with the builder’s domestic projects, and so will have a limited impact on its stock price, said BOCI Research analyst Patrick Li. The Chinese railway company had a $5.4 billion initial public offer last March, and its shares have lost only 9.2% of their value since then amid a general market slide.

Riyadh’s plans to spend 450 billion riyals ($120.1 billion) to upgrade the country’s infrastructure over the next five years could represent a bonanza for Chinese builders. Meanwhile, the fact that Hu chose Saudi Arabia as the destination for his first overseas trip in the new year also marks Beijing’s interested in firming up relations with the world’s top oil producer.

Beijing has long regarded its Muslim population, concentrated in the country’s northwestern provinces, with wariness. Organized religious activity is strictly limited and controlled by the Communist Party. Unrest in Xinjiang Province during the run-up to the 2008 Beijing Summer Olympics led to a sharp crackdown.

In Hong Kong trading, China Railway Construction (other-otc: CWYCF – news – people ) added 20 Hong Kong cents (3 cents), or 1.9%, to 10.90 Hong Kong dollars ($1.41). 

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