China Rail Sector

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China’s rail sector continued to grow impressively in 2009, as massive government investment spurred a large-scale expansion and improvement of China’s railway network. Capacity growth—operating in response to the global financial crisis that struck late in the year—expanded so quickly that the government has now readjusted its capacity goal for 2020 upward to 120,000 km from 100,000 km. Total investment for 2008 equalled CNY 330 bn, an increase of 86 percent year-on-year. In 2009, China's fixed asset investment in the railway industry totaled round CNY 700bn and in 2010, that figure is expected to hit CNY 823.5 bn, to include CNY 700bn in infrastructure construction and to fund 70 new projects. At the end of this year, the country's operating mileage is predicted to exceed 90,000 km. According to the Ministry of Railways, China will inject more than CNY 700bn into the railway industry every year in the period from 2010 to 2012.

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China Rail Sector

  1. 1. The Rail Sector OverviewChina’s rail sector continued to grow impressively in 2009, as massive government investmentspurred a large-scale expansion and improvement of China’s railway network. Capacity growth—operating in response to the global financial crisis that struck late in the year—expanded so quicklythat the government has now readjusted its capacity goal for 2020 upward to 120,000 km from100,000 km. Total investment for 2008 equalled CNY 330 bn, an increase of 86 percent year-on-year.In 2009, Chinas fixed asset investment in the railway industry totaled round CNY 700bn and in 2010,that figure is expected to hit CNY 823.5 bn, to include CNY 700bn in infrastructure construction andto fund 70 new projects. At the end of this year, the countrys operating mileage is predicted toexceed 90,000 km. According to the Ministry of Railways, China will inject more than CNY 700bn intothe railway industry every year in the period from 2010 to 2012.Most notably, a new high-speed rail line linking Beijing with its major port at Tianjin beganoperations in August 2008 on the eve of the Beijing Summer Olympic Games. The line, which travelsat 350 km/hr, greatly assisted logistics operations during the game in which an unprecedentednumber of people descended onto the capital. Other major projects launched—out of a total ofabout 80—included the Beijing-Shanghai express railway and the Shanghai-Nanjing and Beijing-Shijiazhuang Passenger-Dedicated Lines.The utility of rail transport in times of disaster became apparent in 2008 in the aftermath of the May12th earthquake at Wenchuan, Sichuan Province. In little over a month, over 23.9bn tonnes of reliefmaterial had been transported by rail to the disaster site, greatly aiding relief efforts. China’s railnetwork also transported over 10m tonnes of grain to northeast China in a period of 60 days as wellas coal transport of electric power in the summer and agricultural goods to northwest China.Rail-centred logistics companies also grew considerably in 2009. Three professional serviceproviders—China Railway Container, China Railway Express, and China Railway Special CargoServices—have developed into modern logistics providers. All told, rail’s profile in China’s overalllogistics development continues to rise.In an economy that grows as quickly as China’s does, though, even frenetic rail capacity growthcannot always keep pace with demand. While the total mileage of railways in the domestic marketgrew by over 50 percent, bottlenecks still remained a problem, restricting economic development.The Ministry of Railways, according to head minister Liu Zhijun, vowed to fix these problems by 2012.In 2008, 70 new rail projects were started, totalling CNY 1 triliion in investment over several years,accounting for more than 7,000 km in track length. Of these, by far the highest profile passenger railproject was the high-speed line linking Beijing to Shanghai. Travelling at over 350 km/h, the line willdrastically reduce travel times along the 1,350 km route.2009 witnessed Chinas largest ever single investment in the railways network’s history. Capitalconstruction investment reached CNY 600 bn, an increase of CNY 265bn or 79 percent over the
  2. 2. previous year. In 2009, the Railway Ministry completed track-laying 5461 km of new line, 4063 km of which were double-track. Over the year 5557 km of new line were commissioned of which nearly 4,000 km were 250 km/h or more passenger lines. 2010 promises further maturation of China’s rail sector. The government is accelerating the development of 18 new logistics centres and 40 container freight stations which should aid in rail cargo development considerably. In 2009, cargo transport hit 3.33348bn tons, according to the Ministry.China’s railway networkSource: CIO
  3. 3. Key dynamics In response to the global financial crisis, the stimulus package promulgated by the Chinese government has earmarked an enormous amount of funds toward improving rail infrastructure. This investment—akin to China’s investment in its highway network in response to the late 1990s East Asia Financial Crisis—is likely to lead to a vast expansion in rail access throughout the country. A new high-speed line linking Beijing to Tianjin, opened in 2008, signifies the arrival of a new era in Chinese rail. The government is planning a rapid expansion of high-speed lines with the marquee Beijing to Shanghai line already under construction. Passenger-dedicated high speed lines will ultimately become a feature in most of China’s main economic corridors, beginning with the more developed coastal areas. China’s new focus on environmentally-sound transport augurs well for the rail sector. Rail sector carbon emissions remain far lower than that for the air and road sectors, a consideration that appears to be a higher priority for the logistics industry than ever before. China’s intermodal rail network will likely bring millions of low cost workers into the labour pool thereby rapidly facilitating the development of hitherto neglected regions. This will likely boost overall cargo generation at ports and of course will have a subsequent knock on effect throughout the supply chain.

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