But Obama’s high-speed rail initiative has gotten off to a sluggish start, while a much bigger, $300 billion plan to create the world’s largest and most sophisticated high-speed rail network is already rapidly unfolding in China.

“Railroads were always the pride of America, and stitched us together. Now Japan, China, all of Europe have high-speed rail systems that put ours to shame,” Obama said in April.

In a proposal called “A  Vision  for  High-Speed  Rail  in  America” Obama and the Federal Railroad Administration outlined a plan to develop 10 “potential” 100-600 mile corridors in the United States, “similar to how interstate highways and the U.S. aviation system were developed in the 20th century.”

Developing all 10 high-speed corridors could eliminate 6 billion pounds, or about 3 million tons, of greenhouse gas emissions each year, the FRA said.

But the plan was pitched as more than a way to make travel cleaner and more efficient. It was touted as a way of creating jobs. In April, when Obama gave his speech, the unemployment rate stood at 8.9%. It’s since risen to 9.4% in July and will likely test 10% by the end of the year.

Meanwhile, the FRA has until 2012 to disperse the first $8 billion of the total $13 billion allocated to high-speed rail. And when that money is finally paid out, it’s more likely to go towards upgrading existing infrastructure than laying new high-speed rail.

“No one expects we are going to begin, let alone complete, the high-speed rail system with $8 billion,” FRA spokesman Warren Flatau told CNNMoney. But the stimulus funds represent the “groundwork for a more sustainable program of funding in the future.”

The remaining $5 billion has been included in the president’s budget over the next five years.

Already, it that amount seems to be woefully inadequate. Last month, more than 40 states submitted 278 pre-applications for stimulus-funded high-speed rail projects. The total amount of funds requested amounted to $102.5 billion in requests, according to CNN.

China Fast-Tracks High Speed Investment

High-speed rail may be on its way to the United States but it’s already arrived in China.

China introduced a 270mph maglev train service in March 2004 and regular high-speed train services in April 2007. But it’s not stopping there.

Beijing will spend $50 billion on high-speed rail this year alone, and the central government plans to spend another $250 billion over the next decade. By 2020, China will have laid nearly 16,000 miles of high-speed track capable of carrying the fastest trains on the planet. By comparison, America has just 457 miles of high-speed track.

And unlike in the United States, China’s high-speed railroad initiative is already producing jobs. So far, the construction of the Beijing-Shanghai high-speed route alone has created about 110,000 jobs and is playing an enormous part in China’s economic recovery.

Spending on railways jumped 126.5% year-over-year in the first half of 2009, leading to a huge increase in the nation’s steel production at a time when global demand was decidedly weak. China’s crude steel output in July reached a record 50.68 million metric tons, up 12.6% compared with last year, according to figures from the National Bureau of Statistics.

There is no doubt that “the acceleration of [the massive railroad build-out is playing a key role in China’s recovery,” David Li, an economist at Beijing’s Tsinghua University told Fortune.

Liang Yi, the vice CEO of the China Railway Construction Co. (CRCC) subsidiary working on the Beijing-Shanghai route told Fortune that his company may hire up to 20,000 new university grads to meet the growing workload. Liang said his unit alone is absorbing 8,000 more workers this year than it did last.

Of course, that doesn’t mean Chinese companies are the only ones profiting from China’s railroad expansion.

International Business Machines Corp. (NYSE: IBM) won a contract to provide software for high-speed trains the Guangdong province. Also, IBM last month announced that it was opening a “Global Rail Innovation Center” in Beijing.

“In the next five years, China is investing more in high speed rail than the rest of the world combined,” Keith Dierkx, the director of this new center, told TheInfrastructurist.com. “This enormous build out of the HSR frees up their traditional rail network for freight. So, they’ll have more high-speed rail than the rest of the world combined–but they’ll also be getting better freight capacity.”

Canada’s Bombardier Inc., the world’s largest rail equipment manufacturer, also got in on China’s massive HSR initiative when it won a contract for work on 40 high-speed trains, as well as a signaling system.

Fortune estimates that foreign companies have won about $10 billion worth of contracts for work on China’s high-speed rail system.

Still, Money Morning Investment Director Keith Fitz-Gerald believes that the best way to capitalize on China’s massive rail build-out is by investing in Chinese companies that will have a long-term presence.

“There’s certainly hay to be made on high-speed rail development in the United States, but if you really want to capitalize on this trend you should look at China, which accounts for 25% of the world’s railroad traffic but has only 6% of the world’s rails,” Fitz-Gerald said. “To the extent that China builds high-speed rail, then effectively railroad companies across the country will benefit from increased traffic.”

In a recent Money Morning Webinar, Fitz-Gerald named Guangshen Railway Co. (NYSE ADR: GSH) as company that has good long-term prospects in China’s transportation sector.

“Guangshen is involved in high speed, it’s involved in capacity and it’s got relatively low debt,” said Fitz-Gerald. “It’s just another example of a Chinese company capitalizing on a huge infrastructure expansion that’s backed by billions of dollars in government investment.”

Guangshen’s 2008 operating revenue jumped 11.23% in 2008, in part because of HSR development.

Source: High-Speed Rail Puts Investors on the Fast Track to Profits in China, but Languishes in the U.S.

But it’s the first time China’s commercial airplane sector has a long-term flight plan to follow.

Roughly $4 billion deals involving 102 aircraft were signed during the six-day event, which was attended by representatives of 600 aviation companies from 35 countries, officials from the Airshow China Organizing Committee told the People’s Daily newspaper.

But the real news was that China has set a timetable for its proposed “jumbo” jet, a passenger aircraft China plans to design and build domestically to compete directly with commercial jetliners built by industry heavyweights Airbus SAS of Europe and The Boeing Co. (BA), the U.S.-based airliner industry pioneer that’s America’s biggest exporter.

China said its jumbo jet would be on the market by 2015. The Commercial Aircraft Corp. of China Ltd. (CACC), established in May, was put in charge of the huge jetliner’s assembly, marketing and after-sales service. The government is providing $2.9 billion in seed money for the venture.

Miao Wei, vice minister of industry and information technology, told the People’s Daily that the design concept and research on the airplane’s key technologies will be finished before 2010, and the first airliner will roll off the production line before 2015. With those tasks completed, China’s jumbo jet should be in service by 2020.

“The next few years will be an important period for China’s aviation industry,” Miao said.

China’s move into the jumbo-jet market is just the latest move by the world’s fourth-largest economy to establish itself as a global superpower. This particular project was chosen well.

During the next 20 years, in fact, Boeing estimates that air carriers worldwide will require 28,600 commercial aircraft with a value of $2.8 trillion. The Boeing outlook is generally viewed as the world’s best analysis of the global market for commercial airliners and cargo aircraft.

And this projection isn’t limited to jumbo-sized passenger jets: It includes short-range connector planes, regional jets, cargo planes and the jumbos. When it refers to a “jumbo” jet, China is talking about the so-called wide body airliners that carry 200 to 800 passengers and that make globetrotting trips to almost any point on the globe.

China alone will require 3,400 new airplanes worth about $340 billion over the next 20 years, Boeing projected in its recent market forecast. That works out to sales of about  $17 billion annually over the next two decades. About 2,650 of those commercial airplanes will be actual airliners, Airbus projected in a forecast of its own. Up to now, Chinese airlines have been placing huge orders with Boeing and Airbus to modernize their air fleets and close the customer-service gap on their foreign competitors.

And neither of those forecasts factor in other white-hot Asian markets – such as Vietnam – which will also need to outfit their commercial air fleets as their economies make the leap from “emerging” to mainstream.

But with such a large potential market, many observers find it surprising that there aren’t more potential players.

That’s changing – or at least it is at the lower end of the market. China and Russia are both well along on government-backed programs to develop a regional jetliner for sale to global customers. Back in March, Japan entered the regional jetliner shootout when Mitsubishi Heavy Industries Ltd. (PINK: MHVYF) unveiled a plan to develop a “regional” jetliner for use by airlines all around the world. The development work alone is expected to cost several billion dollars, but the program has the backing of both Toyota Motor Corp. (TM) – the world’s No. 1 automaker by sales – and the Japanese government.

Mitsubishi Heavy hopes to have the jet in the air by 2013 and is aiming to sell 1,000 of the airplanes over the next 20 to 30 years, grabbing one-fifth of expected new demand in a market that is projected to roughly quintuple to more than 5,000 planes by 2026. But it could be a bumpy flight: Incumbents Bombardier Inc., of Canada, and Embraer (Empresa Brasileira de Aeronautica SA) (ERJ) of Brazil, currently dominate the short-range jetliner market.

Both the China and Russia ventures will take wing well before Japan’s new jet, and the eventual existence of all five combatants in this slice of the airline market could lead to some pretty congested airspace – especially since several players are expected to link up with market-savvy foreign heavyweights, including, potentially, Boeing.

As tough as that sounds, attacking the jumbo-jet market will be tougher still. Even with fewer contestants.

Jumbo Challenges for a Jumbo Jet

The tremendous appetite for capital, the engineering challenges that range from complex aerodynamics to new composite materials, and the need to be able to manage a string of suppliers scattered about the globe are just a few of the hefty demands that make this mountain too high for all but a few global companies to climb.

Right now, in fact, there are only two new jumbo jet programs under way, either in development or in testing, and both have been riddled with technical problems and other issues that have resulted in pushed-back delivery dates. These are:

• The Boeing 787 “Dreamliner,” a replacement for the company’s Boeing 767. It’s making heavy use of composite materials and depends heavily on a network of global suppliers, and delays have pushed the delivery date for the first jets well into next year. Boeing’s just-settled strike is the latest such issue.
• And the Airbus A350, a replacement for the Airbus A330/A340 line, and a program whose many delays have pushed its delivery date out to an estimated 2012 or 2013, according to several sources.

Given that huge companies such as McDonnell Douglas and Lockheed have gone up against Boeing and failed, many analysts are skeptical about the “commercial prospects” of a jumbo jet designed and built in China. China has virtually no experience in this market and the two other (known) attempts – ventures with Douglas and Airbus – ended in failure.

And even if China succeeds, it’ll be a good 20 years before U.S. or European airlines flying China-built jets will be ready to lose your bags on a regular basis.

China’s jumbo-jet company “might be able to establish a presence in the business over the next 10 to 20 years if they nurture it with government seed cash, and gradually offer shares to the private sector,” Richard L. Aboulafia, an aviation analyst with Teal Group Corp., an aerospace-and-defense consulting firm, told Reuters.

Although that’s probably a good estimate, China clearly isn’t deterred by such long time frames. The country reorganized its aviation industry back in 1999, establishing 10 state-owned companies – each with carefully defined mandates, reports GlobalSecurity.org. The jumbo-jet program grew out of that reorganization.

Growing the Business

The jumbo jet isn’t China’s only commercial aircraft program.

Among the deals signed at the air show, the Commercial Aircraft Corp. of China (COMAC) said it will sell 25 ARJ21-700 regional jets to the GE Commercial Aviation Services unit of General Electric Co. (GE) in a deal that’s valued at $733 million. The first jet will be delivered in 2013, with one per month thereafter, the People’s Daily reported.

COMAC Board Chairman Zhang Qingwei said it was the first time Chinese-developed and manufactured regional jets have entered Western airline markets.

Miao said the ARJ21-700 will enter service next year, while work on a 100-seat version, a business-jet model and a freighter begin in the New Year, as well. China has also received 136 orders for the MA 60, a propeller-driven commuter plane, Miao said. Xi’an Aircraft Industry Group Co. Ltd., the maker of the plane, has already delivered 34, he said.

In terms of non-civilian aircraft news, the air show hosted the first rollouts of China’s homebuilt Chengdu Aircraft Industry Corp. J-10 “Annihilator” fighter and FBC-1 “Flying Leopard” fighter-bomber.

Models of a “soft” lunar-lander, and a lunar rover vehicle – all for the second phase of Chinas’ lunar space program, which aims to explore the moon’s surface – were on display at the air for the first time. Designed and produced by the China Aerospace Science and Technology Corp. (CASC), the lander is likely to be launched in 2013, a corporation source said yesterday.

The 8th China International Aviation and Aerospace Exhibition will be held in Zhuhai from Nov. 16 to 21, 2010, the organizers said.

Source: China’s Commercial Aviation Sector to Enter “Important Period,” Top Official Says