Restructuring China's Freight Railway System

With more than 120,000 kilometers (almost 75,000 miles) of track crisscrossing the country, China’s rail transportation network was the second largest in the world (only the US had a larger system). Much of the recent growth in this network, though, came from the construction of China’s state-of-the-art high-speed passenger rail system in the mid-to-late 2000s. Rail transport’s share of the freight shipping market in 2015—about 19 percent of ton-kilometers of China’s domestic freight traffic and about 8 percent of total tonnage—was less than that of the United States, where rail accounted for about 34 percent of ton-kilometers and 9 percent of total tonnage. Although the organization of the system had undergone major changes since 2013, it remained within the control of a powerful state-owned enterprise. And although China had experienced improvement over the last decade on several productivity and quality metrics (e.g., safety) and had compared favorably with other countries on certain metrics related to railroad productivity (e.g., capacity utilization), its railroad labor productivity lagged behind that of the US, Japan, and some European countries. Furthermore, its innovation in the increasingly vital area of intermodal operations—the connected use of trucks, railroads, and cargo ships to transport containers of merchandise and parcels—appeared to be far behind that of the US. For these reasons, some experts believed China would eventually have to restructure its system by introducing competition to make it more productive and innovative. This would, to say the least, pose a major challenge for a country that generally preferred to keep its infrastructure industries under state control.