Tag Archives: railways ministry

Ex-Railways Minister Liu Given Suspended Death Sentence

The corruption trial of Liu Zhijun, the disgraced former railways minister who dipped his hand deep into the honeypot of China’s rapid expansion of its high-speed rail network, has been overshadowed by the Bo Xilai affair. Yet it is arguably a purer test of President Xi Jinping’s stated intention to crack down on corrupt officials as it doesn’t carry any of the political theatre of the Bo case.

Liu becomes the most senior official to be sentenced since Xi came to power, though the investigation and arrest of the 60-year old former railways minister predates that. A Beijing court convicted Liu of accepting 64.6 million yuan ($10.5 million) in bribes between 1986 and 2011, though this Bystander suspects that isn’t even the half of it. By some estimates 3% was skimmed off China’s 2 trillion yuan buildout of its high-speed rail system.

Liu’s sentence of death with a two-year reprieve is effectively a life sentence. Sufficient deterrent, not just for what Xi called the powerful “tigers” but also for the low-ranking “flies” that the anti-corruption drive is targeting? More cases of both kinds being brought to court would help, but institutional reform is needed to break the systemic grip of graft.

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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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Party Expels Former Railways Minister Liu Zhijun

Disgraced former Railways minister Liu Zhijun has been expelled from the Party for corruption. He is also taking the fall for the extensive corruption and mismanagement throughout China’s sprawling railway system.

Xinhua reports:

Investigators found Liu used his position to seek huge illegal interests for Ding Yuxin, chairman of Beijing Boyou Investment Management Corporation, maneuvering which caused great economic losses and negative social influence, according to a statement issued by the CPC’s Central Commission for Discipline Inspection (CCDI).

The CCDI also discovered Liu, who the statement labeled “morally corrupted,” had taken a huge amount of bribes and bore the major responsibility for severe corruption in the railways system.

Liu was removed from office in February last year. He will now face criminal charges which carry a lengthy jail term and possibly a death sentence.

The rapid expansion of China’s high-speed rail network has had the bloom taken off it by massive fraud, waste and mismanagement. The Railways Ministry’s all-encompassing control of the system–alone among the world’s largest railways, it makes policy, builds and owns the infrastructure, operates the services and regulates the system, which stands alone from all other forms of transport–is starting to be undone. Last month, plans to allow more private investment into the system were announced, a first step to breaking up the ministry. This would separate the infrastructure from operations, but not go as far as a World Bank proposal to put railways under a new transport ministry.

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Breaking Up China’s Railways Behemoth

This Bystander suggested in January that China’s scandal-plagued railway ministry’s monopoly over the rail system might be due for a shake-up, highlighting a World Bank working paper as a trial balloon. So we note this sentence on the to-do list set out in the work report of China’s most powerful economic planning agency, the National Development and Reform Commission, to the recent National People’s Congress.

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.

As the Bank’s paper pointed out, 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 problem-beset build-out of the high-speed rail network, China’s rail system is now just so massive it is beyond the management of a single entity. The Bank’s paper, however, argued for rail to be put under a new transport ministry with multi-modal responsibilities for coordinating transport. If China is to make the most of all the transport infrastructure it has built over the past two decades, and that to come, it needs to integrate its road, rail and internal air and shipping with the sort of national transport strategy that is common in other countries.

That would be a mighty big to-do for the current leadership to leave to their successors. They would, no doubt, be happy to duck the bureaucratic civil war that carrying it out would involve. “Study and formulate a plan” is usually a euphemism for kicking hard decisions down the tracks, but they are none the less necessary for that. Breaking up the behemoth that is the railways ministry would be a good start.

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No Way To Run A Railroad

Eight countries–Australia, Brazil, Canada, France, Germany, Japan, Russia and the U.S.–account for two-thirds of the railway traffic in the world outside China. Each runs their rail system in broadly the same way: a transport ministry with multi-modal responsibilities for coordinating transport; separation of rail policy and regulation from operating services; division of freight and passenger rail; and services delivered by companies, whether private or state-owned.

China is different. The transport ministry has no mandate over rail; that is the responsibility of the railways ministry which both makes policy and operates virtually all services through 18 regional rail authorities. They are part of the ministry, not even state-owned companies, and operate both passenger and freight services. The result is a ministry monopoly over both policy-making and the administration of the railways. In the guise of China Rail, the ministry accounts for 99% of passenger kilometers travelled and 94% of freight tonne kilometers.

A new paper by Paul Amos and Richard Bullock, two transport consultants, published by the World Bank’s Beijing’s office raises the question of whether it is time for China’s system to fall more in line with the rest of the world. Not because the existing system has failed to deliver. Despite some spectacular missteps around high-speed rail, the railways ministry has given China the world’s busiest passenger rail system–it will carry and estimated 235 million passengers during the coming Spring Festival–and second busiest freight network.

Amos and Bullock’s argument for change is instead that the market for transport has changed. Road, inland shipping and air services have improved immeasurably over the past two decades, and are taking market share from rail. Those new competitors are mostly companies, not other government departments. Second, China’s rail system is now of a size where it is too big to be run efficiently as a unitary system. Amos and Bullock note that if China Rail was split into five equal regional operating companies, each would be among the world’s ten busiest rail systems. Third, if China is to make the most of all the transport infrastructure it has built over the past two decades, and that to come, it needs to integrate and coordinate road, rail and internal air and shipping with the sort of national transport strategy that is common in other countries.

Amos and Bullock propose creating a transport ministry responsible for policy across all means of transport. A national railway administration within the transport ministry would be responsible for railways regulation and long-term policy, but not services. Those would be run by a number of large, autonomous regionally-based operating companies, either privately or state-owned, along with smaller specialist inter-regional services and industrial railways such as those that now carry coal and other natural resources.

That would all make the management of China’s rail system look a lot like that of the other big railway nations. Breaking up the railways ministry, and disrupting all the vested interests that it has cultivated over the past half century, would be a huge political undertaking. Yet in the wake of the corruption scandals around the high-speed rail build-out and the Wenzhou accident, the railways ministry may be more vulnerable to dismantling than ever before.

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