China Rail Ministry Forced to Ramp Up Prices

By Gao Zitan
Gao Zitan
Gao Zitan
February 21, 2013 Updated: April 6, 2013

Heavy debt pressure due to poor investment decisions by the Chinese Ministry of Railways is leading another rise in railroad shipping costs.

The last time the regime fixed prices on rail shipping was May 2012: shipping costs then rose by 1 cent per tonne-kilometer, a 9.5 percent increase from 10.51/tkm to 11.51/tkm. Operational costs increased one cent, too. 

Now, shipping costs are going up again, in a demonstration of how the state extracts subsidies to continue largely inefficient operations. 

The cost will rise by another 1.5 cents/tkm, a 13 percent increase to 13.01/tkm, officials at the CCP’s Development and Reform Commission revealed to the Shanghai Securities News.

Industry analysts estimated that the price increase would add revenue of 30 billion yuan to the Ministry of Railroad.

Wang Mengshu, a researcher with the Chinese Academy of Engineering, told Shanghai Securities News that the shipping revenues are used in subsidizing deficits suffered from the railroad’s passenger service. 

The first three quarters of 2012 saw continuous deficits of up to 8.54 billion yuan in after-tax profits, a debt-asset ratio of 61.8 percent, according to financial analysis of the Ministry conducted by 21st Century Business Herald.

Dr. Frank Tian Xie, an expert on China’s economy and a business professor at the University of South Carolina Aiken, said that since the railways and airlines are both state monopolies, while highways are heavily tolled, rises in shipping costs will affect all businesses. 

The reason that the Ministry has such enormous debt, analysts say, is due to its massive investments in high speed rail, which have produced far less return than expected by the regime’s central planners.

Translation by Sophia Fang. Research by Ariel Tian. Written in English by James Chi.

Read the original Chinese article. 

Gao Zitan