China's Railway Development Program and the Vision for the Future - INDIAN RAILWAYS STRATEGY WORKSHOP
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China’s Railway Development Program
and the Vision for the Future
INDIAN RAILWAYS STRATEGY WORKSHOP
New Delhi, March 2009
John Scales, Transport Coordinator, Beijing
Jit Sondhi, Railway Consultant
The World Bank
0
Contents
History and Growth
Strategies Implemented
Vision for the Future
The World Bank
1
History and Growth
The World Bank
2
China’s railway: brief history
In 1949, China had only 22,000km of poorly maintained and war-damaged
railway line, less than 1000km double-tracked and non electrified;
Since then, the government has transformed the railway sector into a vital
element of China’s national transport system and a key contributor to
China’s extraordinary record of economic growth;
Today, China Rail is the second biggest carrier of rail freight and biggest
carrier of passenger transport in the world;
In aggregate, China Rail has biggest rail traffic task of any national railway
system in the world.
The World Bank
3
Chinese rail network is still only about 78,000 km (2008)
2007 statistics
27,000 km double-track
25,500 km electrified
63,000 km national
9,000 km joint-venture
5,000 km local
The World Bank
4
On an area basis, the network is relatively sparse
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5On a per capita basis it is even less dense...
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6It is the busiest railway in the world ......
40
35
30
25
20
15
10
5
0
Europe USA Japan Russia India China
2007 - traffic units/route-km (mills)
The World Bank
7Since 1992, traffic on the Chinese railway network has
increased by more than 110 percent, with growth of around 8
percent annually for both passenger and freight since 2000
Total Traffic on China Railway Network
35000
2% average annual growth 8% average annual growth
30000
110%
growth
25000
100 million unit-km
20000
15000
10000
5000
0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Passenger-km Freight ton-km
Source: China Statistical Yearbook 2007
The World Bank
8Much of the traffic is long-distance – average distance travelled in
2006 was about 530 km for passengers and 760 km for freight
250
Passengers and pkm Freight tons and lead
1,800
1,600
200
1,400
1,200
150
1,000
800
100
600
400
50
200
0
0
1-50 51-100 101-200 201-300 301-400 401-500 501-700 701-1000 1001- 1501- >2000
t
um
e
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in
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1500 2000
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Ti
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Distance travelled (km)
Pe
on
C
on
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Iro
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Passengers (million) Passenger-km (billion)
Tonnes dispatched (million) Average haul (km)
¾ Short-distance rail traffic has steadily declined for many years
¾ This trend will be reversed with the introduction of the ‘fast regional rail’ services
¾ Bulk minerals typically average 400 – 600 km haul; all general freight is well over 1000 km –
the major medium-term change will be the emergence of container services as a major traffic
The World Bank
9PASSENGER SERVICES
CR’s policy since 1990 of actively discouraging short-distance passengers in order to
release capacity for longer-distance travel.
The average distance traveled by passengers on the national railway system has nearly
doubled, from 275 km in 1990 to 532 km in 2007.
Strong growth in passenger-kilometers over the period since 1990.
Strategy of CR is to meet the competitive challenge offered by road and air services by
continuing to upgrade the service quality of rail passenger services.
Shorter travel times; convenient arrival and departure times; a more comfortable travel
environment; and more frequent services.
The proportion of the fleet that is air-conditioned has increased from under 10 percent
(1990) to over 60 percent in 2007.
In 2007, EMU trains having a maximum speed of 200-250 km/h introduced.
In 2008, EMU trains having a maximum speed of 300-350 km/h introduced.
The World Bank
10FREIGHT SERVICES
Although CR built several new rail corridors over the past decade, and upgraded many
others through double tracking and electrification, freight capacity has remained
constrained and the request for freight loading continues to exceed the 140,000 cars
loaded daily in 2007.
Almost all the growth in freight has come from coal and bulk commodities
Of late encouraging container traffic by rail
MOR’s priority has been to improve existing lines, and construct new ones. Current
target 120 km/h speed for freight trains on mixed traffic corridors.
Since 2005 all new wagons have been designed for a 25 tonne axle-load and 120 km/h
speed.
C80, aluminum wagon for 25t axle load with cc of 80t introduced
The World Bank
11Strategies Implemented
The World Bank
12BUSINESS STRATEGIES
Focus on Core Business: Separated non core activities, established independent
entities that compete for CR business. Non-core businesses such as construction of
lines, manufacturing of locomotives and rolling stock, telecoms, track design, technical
institutes, education, medical and social facilities were separated from CR. Staff
reductions from 3.4 million in 1992 to 2.2 million in 2004
Develop World Class Competitive Passenger Services: Included re-pricing
to make these profitable, continuous improvement is service quality (shorter travel
times, convenient departures/arrivals, non-stop services and air-conditioned cars) and
meeting the challenge for market share from highways and air services by introducing
200 and 300 km/h speed services.
The World Bank
13MANAGEMENT STRATAGIES
Implemented Asset Operation Liability System: RAs as profit centers
responsible for profitability. RAs pay a dividend to MOR on capital deployed and rent on
wagons in use. RAs have freedom to pay incentives to managers for exceeding agreed
targets of profitability. Emphasis on safety and in the event of a major accident
incentive payment is cancelled.
Management restructuring: Adopted a flatter organizational structure. In 2004 MOR
took out a whole layer of management represented by the 44 divisional administrations.
Management was consolidated at the level of 18 regional administrations and some
60,000 staff positions were removed. Train dispatch centers were consolidated at RA
level to improve management of train operation and safety and improve operational
efficiency
The World Bank
14LEVERAGING TECHNOLOGY
Strong support for research and development in railway technologies by local efforts as
well as through transfer of technology from established international companies.
Included support for key equipment manufacturing enterprises to accelerate
technological transformation and build a world-class level of railway equipment
manufacturing base in China.
Extensive use of IT for transport management information system (TMIS) that enables
real time tracking and management of rolling stock and provides timely and accurate
cargo tracking information for shippers and enterprises and creating the foundation for
railway e-business. All wagons, passenger cars and locomotives are fitted with RFID
Tags and train manifests are prepared automatically. A network wide staff e-training
system also established.
Development of 9,600-12,000 kW locomotives, high capacity (80t cc) low tare freight
cars, GSM-R railway mobile communications system etc.
Development of track, electrification and rolling stock technologies for 200 and 300
km/h speed railway systems.
The World Bank
15FINANANCIAL STRATEGIES
Rail Construction Fund to develop railways: Under the RCF scheme, a
surcharge is levied on freight tariff. The proceeds are accumulated in a separate
account and can be utilized for new construction of railways with the approval of the
planning commission. No tax is levied on RCF.
New industry participants: From 2004 Ministry of Railways has supported the
establishment of new joint-venture railways aggressively that have brought in
provincial governments and/or other investors as partners
The World Bank
16Between 1995 and 2000, staffing reduced sharply as
most central ancillary businesses were divested but
many small businesses (DECOs) are still operated by
Includes staff in ancillary
regional4500
Rail Authorities units (construction units,
rollingstock factories etc) –
4000 many since privatised
3500
Includes staff in current 19
3000
ancillary units (containers,
Workforce (EOY) (000)
parcels, etc)
2500
2000
1500
1000
Includes staff in ancillary
RA units, including
500 DECOs.
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Total CR Total rail Total RA
The World Bank
17REASONS FOR HIGH ASSET UTILISATION
Larger proportion of double as well as electrified track.
CR has adopted automatic signaling more aggressively than in India.
High maintenance standards, low failure rates
As a result CR operates roughly 1.5 times the number of trains on electrified
double tracks than Indian Railways
Low wagon turn round, low terminal detention
Efficient IT based traffic and wagon management systems
The World Bank
18Despite increasing traffic, the railways’ share of the national
transport task has declined over the past 12 years, at least in
part because of capacity constraints on key lines
Passenger Freight
60% Freight market
55% share lost to
IWT
50%
Market share
45%
40%
35% Passenger
market share
30% lost to air
25%
20%
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Source: China Statistical Yearbook 2007
The World Bank
19Declining modal share has social downside - railways in China
have much lower external costs* than other modes of transport
*Includes estimates of air pollution,
noise, climate change and accidents
Source: University of Leeds for MOR/WB
The World Bank
20Key Features of Success So Far (1)
Commitment to long term strategy and planning: These respond to long term
needs and competitive challenges.
Embracing modern technologies: Recognition that triple challenge of capacity
growth, operational efficiency and service quality best attained by application of
value adding railway technologies in construction, maintenance, operations and
management.
Research and development capacity: Impressive network of design and survey
institutes, specialist universities, research institutes, laboratories and specialist
agencies that enabled China to absorb international practices and develop Chinese
technologies.
The World Bank
21Key Features of Success So Far (2)
Project implementation capacity: Adherence to development strategy facilitated
the growth of impressive capacity for planning, detail design and construction and
rolling stock design and production.
Organizational and management improvements: These have contributed in
delivering improvements in labour productivity, higher asset utilisation and
operational efficiency.
Extensive use of IT: Advanced international practices employed for example in
traffic management information systems, computerized train dispatch systems, PC
based staff training systems and safety systems.
Self financing: Use of freight surcharge to finance new infrastructure, premium
pricing for improved passenger services and JV model for investment.
The World Bank
22VISION FOR THE FUTURE
MEDIUM AND LONG TERM PLAN
2004-2020
The World Bank
23So China Rail and its policy-makers face two enormous challenges
How to deliver long-term infrastructure
improvements – the biggest railway
development program in the world since C19th
Key
challenges
for WB
engagement How the industry can adapt to become more
responsive to the needs of customers in
China’s socialist market economy.
The World Bank pursues a twin-track approach to this engagement,
separating project delivery from policy dialogue
The World Bank
24Growing demand imposed on a very busy network has
caused conflicting pressures in the allocation of capacity
¾ The Government often imposes operating priorities on China Rail, particularly allocating
capacity to coal trains to keep power stations supplied at periods of high electricity need
¾ There are long waiting times for freight wagons, that have some of the highest utilization
rates in the world: but extra wagons would not solve the problem without extra
infrastructure capacity
¾ CR has so far been unable to offer high quality container rail services to inland areas, partly
because of use of train paths by the bulk freights and passenger services
¾ Peaks in passenger demand at holiday times require intensive operation of extra passenger
services, causing temporary interruption of some freight flows
50
Million traffic units/route-km
40
China
Traffic density on the network in 2006 30
Russia
(measured as millions of traffic units – India
passenger-km plus net tonne-km – per 20
US Class 1
route-km) is easily the highest in the world EU 10
0
2006
The World Bank
25Ministry of Railways has a significant industry management role
Ministry of
Railways
Local Industry
National railway
railways management management
18 railway 5 other transport 14 non-profit
authorities (RA) enterprises organisations Industry
management
Shareholding
Share
holding
Stations 80+ JVs and 3
listed railway
companies
The World Bank
26Three Railway Transportation Enterprises are currently listed on stock
exchanges
¾ Daqin: listed in A-share market
in August 2006 with proceeds
of RMB15 billion
¾ Tielong: listed in A-share
market in 1998 with proceeds
of RMB164 million
¾ Guangshen: listed overseas in
1996 with proceeds of RMB4.2
billion; listed in A-share market
in December 2006 with
proceeds of RMB10.3 billion
The World Bank
27Impact of Projected Economic Growth on Rail Capacity 2000-2020
GDP will quadruple between 2000-2020 (@ 7% pa.)
Economic structure will shift more towards tertiary industries
Urbanization will grow and by 2020, 60 percent population will live in cities.
Coal production will increase to 2 billion tons by 2020 to feed coal based power stations
Petroleum demand will grow about 4% pa.
Steel and agriculture will grow at about 1.5 % pa.
Elasticity of passenger demand with respect to GDP (over all modes) of 0.9 to 2010,
reducing to 0.8 thereafter
Rail freight demand will grow from 1600 (2003) to 3000 b tkm by 2020
Rail passenger demand will grow from 500 (2003) to 1550 b pkm by 2020
The World Bank
28Because of concerns that the rail system would become a
bottleneck to development, the Government approved the
Mid and Long-Term Development Plan (MLTDP) in 2004
Objectives
• Increase capacity and overcome bottlenecks on existing high density lines
• Improve service level to passengers, including speed increase
• Connect more remote areas to the railway network
• Improve international connections (e.g. to Vietnam, Kazakhstan, Mongolia)
• Use new technologies to lower operating costs and improve environmental impact
The plan was subsequently revised in 2007 and the targets increased - in particular the
funding required has approximately doubled to about Rmb 250 billion ($ 36 b) p.a.
Current MoR plan
End 2007 MLTDP 2020
2020 2010 (11 FYP)
Total length of track 77,966 100,000 120,000 92,000
Double track 27,031 50,000 60,000 41,400
Electrified 25466 50,000 72,000 41,400
Passenger dedicated lines 405 10,000 12,000 5,000
The plan includes the development of a number of specialist networks
The World Bank
29The MLTDP planned network of high-speed
dedicated passenger lines in 2020.
¾ By 2020, around 12,000 km of PDL
of “four vertical and four horizontal
corridors” will be built, capable of
300km/hr operation.
¾ Supported by a 20,000 km network
of mixed traffic lines – 200 km/hr for
passenger and 120 km/hr for high-
speed freight (e.g. containers)
¾ This will create a national high-
speed passenger network reaching
most provinces.
The World Bank
30The three MLTDP regional intercity systems to be built
¾ Three regional
systems totalling
200 km.
¾ Some isolated lines
are also proposed
fro other centres Bohai Intercity System
(e.g. Chengdu)
¾ These are all
separate from the
various urban
metro schemes that Yangtze Delta Intercity
are currently under System
consideration
Pearl Delta Intercity
System
The World Bank
31MLTDP improvements to the coal network
In 2020, top ten coal Datong and Mengxi Heilongjiang and
Mengdong
transport corridors will have
an outbound transport
Shenfu
capacity of 2 billion tons.
Taiyuan
Shaanxi
Southeast Yanzhou
Shanxi
Main coal flows are from
northern mines to the coast Henan
and then by ship to eastern
and southern China. Guizhou Lianghuai
The World Bank
32MLTDP plans for network expansion in poorer western China
By 2020,
¾ 16,000 km of new lines will
be constructed
¾ A western railway network
will be created of around
40,000 km.
The World Bank
33MLTDP proposed railway Container Network,
including some double-stack lines
¾ Construct 18 container hubs
and 40 satellite terminals.
¾ Upgrade existing corridors to
allow 16,000 km of double-
stack container transport.
¾ Total traffic is planned at 400
million tonnes (say 40 million
TEU) by 2020, about 8 times
the volume in 2003
The World Bank
34Investment in new infrastructure has increased by over 100% since
2004 but this effort needs to be sustained
Nat budget Dom borrow Intl borrow Bonds
The original MLTDP financing
Dedicated Self-funded Other Traffic
scheme has been overtaken
The current level of investment has
160 3500 been funded by increases in
dedicated funds (mostly RCF),
140 3000 bonds, domestic borrowings and
120 ‘other’
Traffic units (billion)
2500
There have been no promises from
RMB (billion)
100
2000 the central government of any
80 significant contribution from the
1500 national budget
60
1000 Some foreign capital has been
40
Financing plan mobilised e.g. the container network
20 500 in original
MLTDP
0 0
0
94
96
98
00
02
04
06
-2
19
19
19
20
20
20
20
07
20
The World Bank
35MOR now invests indirectly through equity in joint ventures as well as
directly through the railway bureaux
Over 70% of MOR
capital construction
Debt financing Other (RCF, investment is now
(bonds, self-generated through JVs
borrowing etc) etc)
Capital construction
funds ex MOR
160
140
MOR Other
investment shareholders
120
(Provinces via provincial
vehicle investment corporation)
100
Rmb (billion)
80
Railway bureau Debt financing Joint venture
60
40
Project Project
20
investment investment
0
2001 2002 2003 2004 2005 2006 2007
Project Equity
DIRECT EQUITY
The World Bank
36The existing institutional structure has encouraged joint ventures
with provinces and other SOEs but is not likely to attract
significant private risk capital.
With some exceptions, the MOR remains the dominant owner, operator and
regulator of the railway infrastructure and transport industry
New private investment will not be encouraged by this set-up if the
investors, who can only enter the industry via MOR, also may have to
compete with MOR or may present projects that MOR may prefer to
allocate to its own operator (China Rail)
Using a sporting analogy, it would be difficult to attract new teams into a
football tournament if the biggest existing team also:
– designs the playing field
– makes the rules
– and referees the game ! !
The World Bank
37The future success of the railway sector in China will depend on
five main challenges
The World Bank
38The World Bank in China continues to work with Ministry of
Railways and NDRC on these many challenges...
The World Bank pursues a twin-track approach to this engagement, separating project
delivery from policy dialogue
XXX new railway projects agreed or under preparation since 2000 with combined WB
lending of USD YYYY
Y AAA projects including topics as diverse as:
Specification of new traffic management information systems
Advice on non-traditional financing sources
Advice on handling multiple operators
Social costs of railways and other modes
A new integrated transport promotion law
Railway infrastructure investment policies in other countries
Market-based railway pricing policies and structures
The World Bank
39Thank you for your attention
Questions and discussions
The World Bank
40Chinese Socialist Market Economy
“Socialism with Chinese characteristics" is an official term for the
economy of the People's Republic of China which as of 2009 consists of the
state having ownership of a large fraction of the Chinese economy, while at
the same time having all entities participate within a market economy. This
is a form of a socialist market economy that differs from market socialism
and mixed economy in that while the state retained ownership of large
enterprises, it does not use this ownership to intervene to change prices
which are set by the market.
The World Bank
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