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Railway Sector Structure  Railway Industry Organization In China, the Ministry of Railways (MOR) supervises the sector, combining strategy, policy and regulatory functions and administering China Rail (CR), the network of infrastructure and transport services operated by the 18 regional rail authorities (RRAs). The MOR has overall control of policy, technical standards, planning and investment, finance and system-wide train and rolling stock dispatching. But the RRAs are responsible for daily management and delivery of railway infrastructure and rail transport services. In 1990, MOR controlled almost all railway construction, operation, and manufacturing, but since then, most non operating elements have been divested or transferred to other ministries, although MOR still owns and supervises a few specialized companies related to rail transport. The railway sector is governed by the 1991 Railway Law, which is similar to railway laws in many countries. The law has five main components: (i) sector administration; (ii) commercial arrangements for passenger and freight transport; (iii) planning, construction standards and opening arrangements; (iv) safety and protection; (v) legal and associated matters. The Law permits and encompasses four types of railways (Article 2):
While the RRAs have been given progressively more commercial freedom in ancillary activities, their core railway function is still closely circumscribed and monitored by MOR, thereby providing the integrated and coordinated national railway system that is branded as China Rail. Rail Sector Strategy China’s railway policymakers face two immense strategic challenges. The first is to increase infrastructure capacity and quality. The second is to reform the industry so it can adapt and thrive in a modern market economy. To meet the infrastructure challenge, China has embarked upon the world’s biggest program of railway construction since the nineteenth century. In January 2004, the State Council approved in principle the Mid- and Long-Term Railway Development Plan, setting out construction priorities and providing the framework for developing future five-year plans. In 2004, costs estimates for implementing the Plan were RMB 1.7 trillion through 2020 (in 2004 prices). This has since been revised upwards partly due to the Economic Stimulus Program Government adopted in 2008. The new plans will increase the public rail network to 120,000 km by 2020, up from 75,000 km in 2005, including separate high-speed passenger routes on the main corridors. By 2020 half of the network will be double-tracked, or electrified, or both. As of early 2011, the high-speed passenger network is ahead of schedule but may in due course be slowed to manage debt. The completed network will feature services up to 350km/h based on four north-south and four east-west corridors and by 2020 will have 16,000 route-kms, more high-speed rail line than the rest of the world put together. Also, three regional intercity systems covering major cities and towns in each are planned in the Bohai Sea area (Tianjin, Beijing, Qinhuangdao); the Yangtze River delta (Shanghai, Nanjing, Hangzhou); and the Pearl River delta (Hong Kong, Guangzhou, Shenzhen). Rail freight transport will also be enhanced. Existing network capacity freed up by launching new dedicated passenger lines will be used to meet growing freight demand. The Plan includes high-capacity coal transport corridors, based on China’s ten major coalfields, to provide annual coal transport capacity of 2.0 billion tons by 2020. The rail container industry, so far rudimentary, will be boosted through upgrading those railway lines with intensive container transport. The MOR established a joint venture with international investors to build container terminals in 18 major centers and ports that will be linked by regular container train services. Redeveloping existing freight terminals will establish another 37 satellite terminals, with 150 more conventional stations equipped to handle containers. Some major routes with heavy container traffic are being upgraded to allow double-stack container trains. China Rail progressed rapidly in pursuing reforms to improve its organization and the railway industry is embracing new participants. By 2005, MOR had supported the establishment of 46 joint venture railways (of which 24 were operating) with provincial governments, enterprises, and to a minor extent, private investors. Some 19 joint-venture railways were newly formed to support trunk-corridor development. In 2007, MOR reached agreement with international freight and logistics companies to establish a joint venture company to develop and operate the new regional container hubs mentioned above. On many low-density lines, some separation and divestment to local management has occurred, with an emphasis on reducing losses. In terms of reform strategy, the National Development and Reform Commission (NDRC) has set out policy principles to be adopted: separate government administration from enterprise management; introduce competition where suitable; and regulate industry more effectively. The MOR will set the timing for these measures; for now, MOR prioritized infrastructure and service development over basic structural change. Purchase of Transport Services China Rail has no policy or system of explicit payments for loss-making passenger public service obligations. Unlike most national passenger railways, China Rail has never built and does not operate any suburban rail networks, which in other countries are a prime area for budgetary support. Arguably, a PSO system may be inappropriate since Government, including MOR, explicitly views passenger services as both social service and commercial activity, and reallocates net revenues across RRAs to ensure financial balance in each. A PSO system isolating and valuing the loss making elements of service may be simply unfeasible at the scale required for China’s huge integrated passenger operation. However, the Ministry of Finance does provide capital contributions to railway line construction in remote regions. Industry Regulation The MOR is responsible for nearly all aspects of railway economic and safety regulation, but the State Council must approve passenger fares and freight tariffs on State railways. In practice, the NDRC administers economic and safety regulation; it regulates and approves CR tariffs, and tariffs on new lines, and regulates inter-Provincial joint ventures and local railways. Ministerial Apparatus The MOR central administrative unit, based in Beijing, is very small. In 1998, MOR reduced its ministry staff to just over 400, down from 853. The Ministry converted some functions into companies that operated subsequently on a fee-for-service basis, and transferred other functions, primarily transportation management staff, to the RRAs. However, to some extent the changes were cosmetic, because many staff continued to perform the same tasks in the same offices. The remaining MOR staff includes nearly 100 traffic dispatchers (to conform to Article 3 of the Law). Figure 1 summarizes the Ministerial apparatus. 
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