Risk-averse restructuring of freight railways in China

The Chinese freight railways system has been under capacity pressure and apparently acting as a constraint on continued economic growth for several years now. Earlier government consideration of serious structural reforms has given way to an emphasis on a dramatic expansion of the track network, most conspicuously by construction of high-speed passenger lines to free capacity for freight trains. A good deal of uncertainty remains as to both whether there will be sufficient track capacity to handle the increased volumes of coal and containers necessary for continued growth, and whether the desired private investment funds will be forthcoming so long as the system remains under tight government control.

► China requires large increases in freight rail capacity to support economic growth.
► Study of rail competition has been replaced by emphasis on attracting investment.
► Attracting private investment is difficult in the current institutional climate.
► Expanded container operations risk crowding out the coal trains that support growth.
► Alternative scenarios for introducing competition into the system are discussed.