Cherry-Picking Lessons From the China Train Crash

 | Aug 01, 2011 | 11:30 AM EDT
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About a week ago, there was a huge crash in China -- near the city of Wenzhou -- involving two high-speed rail trains. 40 people are confirmed dead and more than 150 were injured. It was a major event in China, although it's gotten little coverage over here.

The U.S. doesn't even have high-speed rail today. If I took a passenger train from New York to Atlanta, it would take me 18 hours. On the new high-speed link between Beijing to Shanghai (the same distance), the trip would take 5.5 hours.

Over a few years, the Chinese government has spent $400 billion on a network of 10,000 miles of high-speed rail. American liberals pointed to that a few months ago as something to emulate. American conservatives looked at it as government overspending.

Recently, conservative writer Megan McArdle used the Wenzhou crash to take a shot at the Chinese political system and cheerlead for American free-market capitalism. In her insensitive column she quotes herself from an earlier piece:

"Viewed from a purely technological perspective, America's high speed rail is an embarrassment compared to China's: shaky, slow, and not particularly sleek. But viewed in another way, our slow rail network is the price for a lot of great things about America: our limits on government power, our democratic political system, and the fact that we're already rich enough to have an enormous amount of existing infrastructure, in the form of houses, industrial plant, and roads, that would be very expensive to tear up in the name of building rail lines. All in all, I think these things are more valuable than even a really cool train system."

She goes on to say that, in light of the Wenzhou crash, she now feels "more strongly than ever" about this.

But, when the Minnesota bridge collapsed in 2007, killing 13 and injuring 130, was that a triumph of our shaky, slow and not particularly sleek form of democracy? Did it show that we're right to ignore rising load-bearing weights on decaying infrastructure?

We can cherry pick examples to support our political philosophies, or we can invest to make money. High-speed rail is going to continue to develop around the world -- not just in China. Watch for most companies tied to this space to bounce back within the next four months. The best way to play this trend is Hollisys Automation (HOLI). Other ways to play it -- less directly -- are Bombardier (BDRBF, trades on the Pink Sheets) and GE (GE).

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