A sleeping giant awakens; Chinese Railways is being reorganized along more market-oriented lines and is opening itself to advanced technology from outside as it tries to satisfy a voracious national appetite for rail capacity - Company Profile - Industry Overview

Railway Age, April, 2003 by Mike Knutton

Chinese Railways is in a desperate race against time. Keeping pace with the demands of one of the world's most vibrant economies is proving difficult despite some truly heroic and ongoing efforts, both in the provision of new capacity and in embracing advanced technology.

The tell-tale statistics are that while business has been increasing steadily for years, market share has been slipping. In the early 1980s, for example, CR handled almost 60% of the nation's freight and passenger traffic. This had dropped to less than 40% by 2001, partly because annual investment has historically failed to keep pace with accelerating demands for rail transport, and partly because of a massive increase in road infrastructure and greater competition from internal air services.

CR is about half way through its 10th five-year plan involving annual investment of about $8.5 billion, and is in better shape than ever to raise funds thanks to a program that is cautiously loosening the iron grip of the government. The money is being used to add 4,300 miles of new lines, double-track almost 2,000 miles of existing lines, and electrify 3,700 miles. By 2005, the Chinese rail network will be about 47,000 miles long, with one-third double or multiple tracks and more than 12,000 miles electrified. But despite the high level of investment, it is still not enough to help CR get over the finishing line in its catch-up race with the national economy.

China's 11th five-year plan will essentially be a continuation of the 10th as the main problem remains how CR will respond both to the demand for more capacity and to competition. There is also likely to be greater emphasis on the long-term aim of separating freight and passenger traffic, and on IT development. "We are keeping a close watch on the strategies of foreign railways, and we are keen to learn things at management, operational, and technical levels," says CR Senior Strategist Cao Jing.

The basic thrust of CR's plan is to reinforce the role of the trunk/backbone network and to improve eight north-south and eight east-west corridors. Most investment is going into the west of the country, where most of the natural resources are to be found.

Major projects in the current plan include long-term programs to complete the Beijing-Shenyang express passenger line, start construction of the Beijing-Shanghai high speed line, build the Qinghai-Tibet line (p. 4), create a 10,000-mile dedicated express passenger network and an express freight network between major cities, complete an Operation Management Information System, install safety and security monitoring systems on trunk lines, develop a tilting train and a 165-mph high speed train, develop an automated dispatching and operational control system for 125 mph traffic, and introduce large-scale mechanization for track maintenance.

China's main objectives for freight are one-stop movements for bulk transport, shorter transit times with 60 mph express services, heavier loads, and information systems for tracking shipments between different divisions, all of this coupled with development of container, doublestack, and refrigerated transport. CR has a ton-mile market share of 51%, but its portfolio includes virtual monopolies for bulk transport of coal, petroleum products, and other natural resources.

Traffic, in terms of both tonnage and ton-miles, has been rising in recent years, but CR is still unable to meet demand. The forecast for 2002 was 1.87 billion tons and 0.9 trillion ton-miles. Rationalization of the network and structures is aimed at operating more medium and long-distance freight trains. The heaviest trains are now 6,000 tons on the main coal route and 5,000 tons on other trunk lines. Freight car capacity has been increased from 60 to 75 tons, with 25-ton axle loads. The power of diesel locomotives has been increased by 25%. Six- and eight-axle electric freight locomotives have 600kW power per axle for heavy-haul operations.

Economic reform of the railway industry in China began in 1999 with the implementation of what was known as "asset management responsibility," in which the railway and associated enterprises became responsible for "keeping and increasing their corporate value." This more market-oriented approach was followed by separating the Ministry of Railways' administrative and business departments with responsibility for a dozen functions such as transport management and production planning and revenue and expenditure planning being transferred to individual railway administrations, of which there are 44.

There are now further moves to separate other government functions, introduce more "enterprise management," reduce headcount, and increase efficiency. CR is now more accountable and more in charge of its own destiny with responsibility for its own balance sheet and the right to raise capital from the private sector. It also means that the government will not provide any subsidies for passenger or freight operations. CR is currently turning a small profit.