Announcement of China's Rail Network On-Track to Reducing Congestion on June 2, 1995

FOR IMMEDITE RELEASE The World Bank East Asia & Pacific Region 1818 11 Street, NW Washington, DC 20433. USA Press Release no. 95/44EAP Contact: Rachel McColgan-Moharned (202) 458-0358 fax (202) 522-3405 China's Rail Network On-Track to Reducing Congestion Washington, June 2, 1995-- Congestion on major rail routes to seaports, an impediment to economic growth in the landlocked provinces of China, will be alleviated by the Seventh Railway Project, approved yesterday by the Executive Board of the World.Bank. The existing railroad network is unable to cope with the rapid growth in goods and passenger traffic, leading to a loss of at least 1 percent of GNP annually. This project is the seventh of its kind undertaken in China to address deficiencies in the railway sector. The S400 million loan - 23 percent of the total project costs will be onlent by the Ministry of Finance to the Ministrv of Railways (MOR). The railway system is the dominant mode of transport in China: * It carried about 55 percent of the country's total freight and about 44 percent of its passenger traffic in 1993; * The national network has about 54,000 km of main routes; * MOR is responsible for non-transport activities that include 35 factories, 20 construction companies, 11 universities; * More than 3.4 million people work in the Chinese railway system. Until recently, investment in China's transport infrastructure was significantly lower than that of other large emerging markets: between 1980 and 1993, only 1.4 percent of GNP was allocated compared to 2 to 3 percent in Brazil and India. Problems in the sector were exacerbated by (a) pricing which failed to moderate demand and raise more revenues for congested routes and (b) the complex regulations and structure between the railway system and the Government which hampered the efficient market- oriented operation of the former. Major reforms have been undertaken over the past decade: MOR has embarked on an ambitious program - a 30-point Action Statement - to ameliorate remaining constraints and providing an environment for modem railway enterrises to develop. Ci ina ,.vTs 11orld Bank I of 3 Archives/Records Center, H B1-001 ( 1) Project Description Rail Density (km/'000 population) The main goal of the project is to assist in the Government's plans to reshape the 1.2 - 1.06 railway's organization, redefining the relationship between this sector and the Government. In addition, the project wiII o.s - expand the capacity and enhance the 0.59 quality and efficiency of the rail transport 0.6 - network, making transportation by rail - of both people and goods - a more 0.4 efficient, cleaner, and speedier method of 0.19 0.22 0.2 - travel. o.os 0.07 0 -+ The following six components have been China Russia USA India Brazil Japan identified by the Ministry of Railways as priorities for investment in order to implement the 30-Point Action Statement of Railway Reform: Expanding Corridor Capacity. Financing would be provided to electrify and upgrade the 1,044 km Wuhan- Guangzhou line (the last remaining section of the Beijing-Guangzhou trunk line). The line represents 4 percent of the total network, yet carries 15 percent of the total rail traffic. Upgrading would allow longer and heavier trains, reducing operating costs and helping the environment through the switch from diesel to electric locomotives. Modernizing Information Systems. Almost 10 percent of the Bank loan will be used for the acquisition of computer hardware and software, together with the requisite technical assistance to provide the first phase of a Management Information System (MIS) and Transport Management Information Systems (TMIS); a pilot passenger reservations system; and management of funds. Upgrading Telecommunications Systems. The purchase of fiber-optic cables and digital microwave equipment will allow MOR to expand and modernize the railway's trunk transmission and data telecommunications network. Specifically, this component would provide financing for (a) expanding and digitalizing the railway's long-distance transmission network; (b) expanding the data communications network; (c) developing a video conference network, with a terminal for each sub-administration; and (d) setting up a telecommunications network management system. Commercializing Container Transport. Container transport and handling equipment will be purchased and leased on commercial terms to at least two container transport corporations. These would serve as pilot models for self-accounting enterprises, providing an inter-regional, specialized rail-based transport service. Such a service is particularly crucial for landlocked provinces which would gain increased access to international trade if the service and reliability of the rail-seaport link was enhanced. Enhancing Environmental Protection. Technical assistance (TA) and equipment will be provided for MOR to undertake pilot programs to address environmental problems associated with the rail system. Examples of such programs include testing noise barriers, developing a solid waste management strategy, developing noise China Railways .> World Bank 2 of 3 abatement programs, developing a fuel additive for diesel locomotives to boost combustion and reduce emissions. One of the less obvious aspects of environmental protection will also be addressed by developing a strategy to dispose of more than 1 million used styrofoam lunch boxes a day. Expanding System Capacity. This component would support MOR's introduction of more powerful AC electric locomotives which would reduce operating and maintenance costs, increase capacity, and alleviate congestion of the main lines. In addition, a number of studies will be undertaken to provide MOR with the TA and software needed to prepare future railway projects and to develop and apply new railway technologies and management techniques. The loan is repayable in 20 years, including five years of grace, at the Bank's standard variable interest rate. China RailwaYs// World Bank 3 of 3