China’s railway system is near collapse and the Chinese economy seems to have entered a vicious cycle. The economic boom has led to higher demand for consumer goods and raw materials but the railway transport network is too inefficient to respond. The existing stock of freight cars and railway tracks are no longer sufficient while the materials needed to build more lie unused in harbours and railway stations. China’s economic boom has had some serious consequences in terms of increased income and developmental disparities, and has started to show signs of slowing down with unintended collateral problems. Appropriate political and social reforms have been lacking.
“Domestic demand for raw materials has considerably increased, but has not been accompanied by greater transport capacity,” an official from a Beijing logistics firm said. “The inadequacies of the rail transport are getting worse,” said Ma Zehua, Executive Vice-president of Cosco, a state-owned shipping and logistics company. According to Xie Youqiao, deputy director of the National
Development and Reform Commission, “last year transportation by freight train dropped from 60% to 35%.” A great deal of goods, including raw materials and steel keeps on being stored in harbours and railway stations where it waits a long time before getting to its place of destination. In order to stem the rising tide of resentment caused by energy shortages and food price hikes the government has set its priority on domestic transportation of grains, coal and fertilisers at the expense of raw materials required in manufacturing freight cars and building railway tracks. Steel mills and aluminium and copper smelters have had to scale back production because materials needed have not arrived in time.
“The government put in orders for new tracks and cars, but demands for greater steel output and more imports of iron ore have followed”, said Harry Banga, vice-president of Noble Group Ltd., a major commodities trading firms. Because of the difficult state of the transportation system, China’s steel industry is in a bind from which it cannot easily get out. The country is the world’s greatest producer, consumer and importer of steel. The Chinese government plans to invest 2,000 billion yuan (US$ 414,5 billion) by 2020 in order to improve its the national railway network expanding it from the present 73,000 km to 100,000 km and splitting the passenger and freight transport in two. (MR)