Breaking Up China’s Railways Ministry

Entrance to the Ministry of Railways in Beijing,

The Railways Ministry’s days have long been numbered. A year ago this Bystander noted a sentence in the to-do list of the National Development and Reform Commission:

We will study and formulate a plan for reforming the railroad system in accordance with the principle of separating government functions from enterprise management and state asset management.

This followed a World Bank working paper that outlined how the powerful and monstrously large ministry could be broken up. One of its key recommendations has been taken up: putting the oversight and planning for rail under a revamped transport ministry with multi-modal responsibilities for coordinating transport. Operations are going into a separate corporation, a likely prelude to sell-offs.  (State media announcement of the ministry’s dismantling.)

China’s is the only significant rail network in the world where the railways ministry makes policy, builds and owns the infrastructure, operates the services and regulates the system. Beyond the obvious conflicts of interests, which have shown themselves most prominently in the scandal-plagued build-out of the high-speed rail network, China’s rail system is just so massive it is beyond the management of a single entity.

Taking on breaking up the railways ministry in isolation would have been a tough political ask for the new leadership. The ministry has long successfully defended the autonomy of its turf. But the combination of the scandals with the high-speed rail build-out and the desire for a less corrupt and more efficient government overall as necessary for the next stage of China’s economic development changed the political calculation. The “gold bowl that will never break’ has, at last, done so, and China’s transport system will be the better for it.

It also sends a signal that the new leadership is serious about taking on structural reform. That it has only managed to pick off some of the (relatively) easier targets–dismantling railways, consolidating coastal patrol agencies and promoting food and drug safety–but not made as much headway in areas such as  financial markets and energy shows where some of the political constraints on it still lie.

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