China - Socialist economic development (Vol. 7 of 9) : Annex F: The transport sector

Report No. 3391CHA FflL C OPY China: Socialist Economic Development (In Nine Volumes) 3391 Annex F: The Transport Sector Vol. 7 June 1, 1981 (reprinted March 10, 1982) East Asia and Pacific Regional Office FOR OFFICIAL USE ONLY Document of the Wbrid Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS The Chinese currency is called Renminbi (RMB). It is denominated in yuan (Y). Each yuan is subdivided: 1 yuan = 10 jiao = 100 fen Exchange rates used in this report are as follows: 1977 $1.00. = Y 1.828 1978 $1.00 = Y 1.661 1979 $1.00 = Y 1.541 WEIGHTS AND MEASURES Chinese statistics are usually in metric units; in addition, mu and jin are often used: 1 mu = 0.1647 acres = 0.0667 hectares (ha) 1 jin = 0.5 kg FISCAL YEAR January 1 - December 31 TRANSLITERATION The Pinyin system is used in this report.  FOR OFFICIAL USE ONLY C46400/J79057/D1018/02 CHtNA: SOCALTTST ECONOMIC DEVELOP-MENT ANNEX F TM TRAUNSPORT SECTOR Table of Contents Page No. SUMMARY AND CONCLUSIONS . . .* . . . . . . .. . . . . . . . . .. . . . vii A. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . vii B. The System and Its Performance . . . . . .. . . . . . . . . . . viii Description . .. .................. .. ..... viii Traffic Trends . . . . . . . . . . . . . . . . . . . . .xi Sectoral Investments . . . . . . . . . . . . . . Performance . . . . . . . . . . . . . . . . .. xi C. Major Present Issues. .. . ... . .. . . . .. . . . . ... xvi Capacity. . . . . . . . . .. . . .. . . . . . . . . . . . . . xvi Managemant, Policy and Planzn-g o. . * * e . . . . . . . . . xvi Transport Pricing . . . . . . . . . . . . . . . . . . . . . xviii Short-Haul Freight Transport .. . . . . . . . .-. . . . . . ix Passenger Transport . . . . . . . . . . . . .. . . . . . . i Transport and Energy . . . . . . . . . . . . . _ . . . . . . Ezployment and Training . . . . . . . . . . . . .. . . .. . . .. 3.ii Do Conclusions and Rec-ommendations. . ... ........siii Conclusions . . , . . . . . . . . . . . . . . . . . . . .. . . .. ii Recomiendations for Investments . . . . . . . . . . . . . .sv Recomendations.Regarding Institutions and Management of the Sector . . . . .. . . . .. . . . szvii Opportunities for ForeignL Assistance and Advice . . . . . . . zvii. 1. SECTOR DESCRIPTIOI' AND TRENDS . L . . . . . ... .. . . . . . A. The System . . . . . . .. .* . . . . . . . . . . . . . . 1 B. Trends in Transport Performannc ....... . .... 7 Historical. Growth . . . . . . . . . . . . . . . . . . . . 7 Transport and Economic Development . . . . . . . . . . 9 Performance . . _ . . . . . . . . . . . . . . . . . . . 11 Future . . . . . . . . .. . . . . . . . . . . . . . . . . 12 2. PAST DEVELOPMENT STRATEGY AND CRRENT ISSUES . . . . .. . . . 13 A. Transport Developmet. Strategy and the Modes . . . . .. . . 13 Self-Sufficiency, Dispersed Development and Industry Primcy- . . ^ . . . . . . . . .. . . .. . . . .. . . . . O. 13 R.. The Transport Policy and Plan-ing Framework . .. . . . . . 17 C. Transport Pricing .. . . . .. . . a . . . . .. . . . ._ . . . 20 D. Short-Haul Freight Transport. . . .. . . . . . . . . . . . 21 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  C46400/J91841/D1018/03 - ii - Page No. E. Passenger Transport ...... .. .. .. . .. .. .. . 23 F. Transport and Energy. . . . . . . . . . . . . . . . . . . . 25 G. Employment and Training . . . . . . . . . . . . . . . . . . 32 Employment ......... .. ... ... ... .. . 32 Training .......... ... ... .... ... . 34 3. RAILWAYS ................. ....... .. . 35 A. Introduction ......... ... .. ... ... .. . 35 B. Institutions, Organization and Management . . . . . . . . . 37 Traffic and Operations ..... . . .. . . . . . .. . 38 Industry. . . . . . . . . . . . . . . . . . . . . . . . . 38 Capital Construction. . . . . . . . . . . . . . . . . . . 39 Education .......... ... ... .... ... . 39 Planning and Investment . . . . . . . . . . . . . . . ... 39 C. Railway Facilities. . . . . . . . . . . . . . . . . . . . . 42 Routes/Tracks ........ .. ... .. .. ... . . 42 Motive Power ........ .. .. ... .. ... . . 42 Rolling Stock ........ .. .. ... .. ... . . 43 D. Traffic . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Freight ............ ... ..... ... . . 44 Passengers ......... ... .. ... ... .. . 46 E. Operations.. .................... 48 Freight . . . . . . . . . . . . . . . . . . . . . . . . . 48 Passengers . . . . . . . . . . . . . . . . . . . . . . . 50 F. Tariffs and Costs ..................... 50 G. Finance and Accounting ............ .... . . 53 H. Conclusions and Recommendations . . . . . . . . . . . . . . 54 Traffic Demand and Capacity . . . . . . . . . . . . . . . 54 Motive Power . . . . . . . . . . . . . . . . . . . . . . 55 Operations . . . . . . . . . . . . . . . . . . . . . . . 56 Tariffs and Costs ................... . 56 4. HIGHWAYS AND HIGHWAY TRANSPORT ..... . . . . . . . . . . . 56 A. Introduction ......... ... .. ... ... .. . 56 B. Road Institutions, Organizations and Management . . . . . 58 Overall Organization ..... .. . . .. . . .. . . . 58 Planning . . . . . . . . . . . . . . . . . . . . . . . . 59 Design and Supervision of Construction . . . . . . . . . 59 Construction and Maintenance . . . . . . . . . . . . . . 59 Training . . . . . . . . . . . . . . . . . . . . . . . . 60 C. The Road Network . . . . . . . . . . . . . . . . . . . . . 60 D. Design Standards and Practices . . . . . . . . . . . . . . 61 Geometric Standards . . . . . . . . . . . . . . . . . . . 61 Pavement Standards . . . . . . . . . . . . . . . . . . . 62 E. Construction Technology, Standards and Costs . . . . . . . 63 F. Maintenance Technology, Standards and Costs . . . . . . . 64  C46400/J91841/D1018/04 - iii - Page No. G. Road Traffic: Present and Future Trends . . . . . . . . . 66 Traffic Counting . . . . . . . . . . . . . . . . . . . . 66 Existing Traffic and Future Trends . . . . . . . . . . . 66 H. The Vehicle Fleet ....... . ............ 68 I. Road Transport Services ...... . .......... . 70 Organization . . . . . . . . . . . . . . 70 Road Transport Costs and Tariffs . .71 J. Road Financing . . . . . . . . . . . . . . . . . . . . . . 71 Capital Improvements Program . . . . . . . . . . . . . . 73 K. Conclusions and Recommendations . . . . . . . . . . . . . . 73 Problem Areas ..... 73 A Strategy for Roads Development in China . .77 5. WATERBORNE TRANSPORT .................... 79 A. General. ................. ... 79 Introduction. . . . . . . . . . . . . . . . . . . . . . . 79 Institutions, Organization and Management . . . . . . . . 81 Dredging .............. ....... 82 General Problems in Water Transport . . . . . . . . . . . 83 B. Ports. .................... 84 Traffic . . . . . . . . . . . . . . . . . . . . . . . . . 84 Infrastructure . . . . . . . . . . . . . . . . . . . . . 85 Institutions, Organization and Management . . . . . . . . 86 Operations ..................... 86 Major Port Problems and Recommendations . . . . . . . . . 87 C. Inland Water Shipping ......... .. ....... 89 General. .................... 89 Technology . . . . . . . . . . . . . . . . . . . . . . . 90 Tariffs .............. ....... 91 Problems and Recommendations . . . . . . . . . . . . . . 91 D. Coastal Shipping . . . . . . . . .. .92 General. .................... 92 Institutions .... . . . . . . . .. .. . . . 92 Traffic . . . . . . . . . . . . . . . . . . . . . . . . 92 Problems .............. ....... 93 E. Ocean Shipping . . . . . . . . . . .. .93 Fleet .............. ....... 93 Routes and Services . . . . . . . . . . . . . . . . . . 94 Institutions . . . . . . . . . . . . . . . . . . . . . . 94 Problems . . .......... . 95  C46400/J91841/D1029/60 - iv - Page No. APPENDICES A The China Railway Society. . . . . 96 B Chinese Academy of Railway Sciences. . . . . 98 C Proposed Highway Sector Studies . . . . . . . . . . . . . 102 D Chang Jiang Shipping Authority (CSA). . . . . . . . . . . 103 E Summary of Major Chinese Port Data, 1979. . . . . . . . . 106 MAPS IBRD 15512R Railways, Ports and Airports IBRD 15528R Road Network List of Tables 1.1 Development of Domestic Air Services - China and India . 4 1.2 China - Growth of Freight and Passenger Traffic. . . . . . 9 1.3 China - Economic and Traffic Indicators (1957-79). . . . . 10 1.4 China - Modal Distribution of Traffic. . . . . . . . . . . 11 1.5 Density of Traffic per Route-Km. . . . . . . . . . . . . . 12 2.1 Estimated Energy Consumption in the Transport Sector (1979). . . . . . . . . . . . . . . . . . . . . . 26 2.2 India - Comparative Employment Intensity in Different Modes of Transport (1977/78) . . . . . . . . . . . . . . 34 3.1 New Investment in Railways . . . . . . . . . . . . . . . . 40 3.2 Major Rail Projects in Progress - end of 1980. . . . . . . 41 3.3 Originating Freight Traffic. . . . . . . . . . . . . . . . 45 3.4 Passenger Traffic. . . . . . . . . . . . . . . . . . . . . 47 3.5 Selected Operating Statistics - Freight . . . . . . . . . 49 3.6 Selected Freight Rates . . . . . . . . . . . . . . . . . . 51 4.1 Highways Network . . . . . . . . . . . . . . . . . . . . . 61 4.2 Highway Geometric Standards. . . . . . . . . . . . . . . . 62 4.3 Illustrative Data on Costs of Highway Construction, Improvements and Maintenance . . . . . . . . . . . . . . 65 4.4 Traffic Volumes on Selected Trunk Highways (1979) . . . . 67  C46400/J91841/D1029/61 Page No. 4.5 Motor Vehicles Manufactured in China (1979). . . . . . . . 69 4.6 Road Transport Financial Costs and Tariffs ... . . . . . 72 5.1 Total Water Transport Volume . . . . . . . . . . . . . . . 80 5.2 Volume of Commodities Handled by MOC Ports (1975-79) . . . 85  1  C46400/J78983/D1124/53 SUMMARY AND CONCLUSIONS A. Introduction 1. Major progress has been made by China over the past 30 years in extending the size of its transport network, improving its capacity, raising its efficiency, and using it effectively to meet economic, political and social goals. Better transport has been an important factor in helping to achieve the political, economic and administrative integration of a country which is the world's third largest in geographical size and populated by one-quarter of the world's people./l The many and varied improvements that have been made to the transport system are the product of major human and engineering efforts by the people of China and, after the break with the USSR two decades ago, have been made largely without foreign financial and technical assistance. 2. Despite the evident and striking progress, however, when account is taken of China's large physical area and population size the transport system is still relatively underdeveloped, particularly in some rural areas with sizeable populations. These areas need cost-reducing transport improvements and easy market access for advantage to be taken of their development potential and for social services to be provided. Growth of traffic and improvement in transport infrastructure and equipment capacity have not always gone harmoniously together. As a result, capacity shortages exist at times on some routes and at some port and railway terminals in the system. At other places, however, excess capacity appears to exist in both infrastructure and equipment, with underutilization of the latter being partly caused by policy and institutional factors. 3. In 1980 pressure on some of the overburdened links in the transport system eased somewhat because of the slowing down of heavy industry and the cancellation or postponement of some major investment projects. This was especially true of short-haul traffic on the railways. However, ports and many long-haul railway lines remained under heavy pressure; and transporta- tion is still considered the binding constraint on coal production in several provinces (Shanxi, Shaanxi, Ningxia, Guizhou and others), at a time when energy shortages are holding back heavy industrial output. Any substantial growth of demands would put a great strain on heavily loaded parts of the system (particularly some rail lines and a few key ports) and risk making transport weakness a more serious bottleneck to development. The need is clear for further well-planned, well-timed, and economically justified /1 In geographical area, it is third to the USSR and Canada and slightly larger than the US (including Alaska), or Brazil, or three times India, or all of Europe (East and West).  C46400/J79070/D1124/54 - viii - investments in infrastructure and equipment in all the transport modes, both to reduce existing transport costs and to cope with the needs of 'normal' traffic growth. Investment emphasis, however, should be placed increasingly on types of facilities and equipment that would contribute to flexibility, and should be directed more than in the past to densely populated areas with intense economic activity in the eastern parts of the country. Opportuni- ties exist to minimize the amount of such needed investments, or to delay their introduction, by improved management and operating procedures, by more appropriate technical standards, and by a variety of policy and other measures that would squeeze greater output from the stock of human and material resources presently available in the transport sector. B. The System and Its Performance Description 4. Technologically, China-s transport sector is a dual economy. Traditional means such as pack animals, human porters, animal or laborer drawn or pushed carts, and wind powered sampans exist in large numbers alongside a growing, modern transport system (see maps, IBRD 15512R and 15528R). These traditional forms are important in short distance freight movement, particularly in the densely populated eastern parts of the country where they remain a significant feature of the transport scene. While their usefulness is not questioned, they often reduce the capacity of increasingly high-cost modern roads, particularly in the vicinity of large urban areas, to carry motor vehicles. In some cases, modest investments to separate old and modern transport means would produce social benefits, including reduction in the number of accidents. The relative role of the traditional sector is shrinking, however, in the face of the increasing amount, geographical penetration and efficiency of modern transport technology, particularly on the roads. 5. This modern transport system has been developed largely to serve the needs of heavy industry by moving the needed large quantities of mineral ores, construction and industrial materials, coal, and petroleum. The relatively slower growth of light industry and agriculture in China has contributed to relatively lower demand than in other countries for the transport of foodstuffs and consumer goods of the types often carried by truck. Recent economic policy changes, however, are likely to affect this situation significantly and require greater road transport (para. 48). Passenger mobility has also been very low as compared with other countries at the same level of development (paras. 33-34). 6. The major consequence of China's chosen development strategy has been that efforts have concentrated on developing the railways as first priority and to a much lesser extent, on inland and coastal shipping. Roads  C46400/J79057/D1124/55 - ix - and civil aviation have played a smaller role than in many other developing countries, and pipelines are used presently only to transport crude oil - a substantial part of which also moves by rail. In the road sector, the absence of private automobile ownership and the generally low level of motorization have meant much less pressure to build high design standard highways, particularly in and near large cities, such as are commonly found elsewhere in the developing world, to move peak hour traffic to and from work. 7. The railway system in China is the major carrier in the modern transport sector and has more than doubled in size over the last 30 years from some 22,000 route-km to about 50,000 km. By 1979, other than for a small amount of meter gauge line near the Vietnam border and narrow gauge lines elsewhere, China had produced a technically uniform and integrated rail network from a previously run-down, war damaged, uncoordinated system. Over 8,000 km of lines have been double-tracked and over 1,000 km have been electrified - a figure that will quickly rise to 2,000 km as work at an advanced stage is completed. The equipment fleet now consists of some 10,000 locomotives (78% steam; 20% diesel; and 2% electric), 260,000 freight cars and 15,000 passenger coaches. In 1979 this largely Chinese built fleet carried some 1.1 billion tons of freight (38% is coal) and 0.8 billion passengers for 559 billion ton-km and 121 billion passenger-km respectively./l China is now the world's third largest rail freight transport country, after the USSR and the USA./2 While the rail network is now the fifth longest in the world, it is still relatively modest in relation to the size of the country's population and productive area. For example, it is about 20% of the network in the USA, a country of similar geographical size; or 35% of the Soviet Union's; or 20% smaller than that of India, a country which is one-third of the size of China. 8. About 60% of the total of 22,000 route-km of rail lines existing in 1949 were concentrated in the northeast and central coastal regions and made up of different gauges and types. The emphasis in the early 1950s was to rehabilitate and tie them into a coherent standardized system and to build a few important new lines, particularly into Sichuan. After the failure of the Great Leap Forward in 1960, emphasis in railway construction shifted for about five years to improving existing routes and repairing rolling stock. Major capital efforts in new line construction were not resumed until a new and major wave of line construction began in the middle /1 In comparison, Indian Railways performed 163 billion ton-km and 177 billion passenger-km in 1978 and carried 210 million tons and over 2.0 billion passengers (excluding suburban commuter traffic). /2 The 1979 tonnage carried on the railways in China was equivalent to all the rail freight originating in West Germany, France, the UK, Spain, Switzerland, the Netherlands and Japan combined or that in Poland, Hungary, East Germany and Romania combined.  C46400/J89795/D1124/56 of the 1960s and lasted until about 1974. The pattern of new rail con- struction reflects economic, national integration, and strategic consi- derations. Rail penetration into Xinjiang, for example, has been influenced by the search for petroleum and by a quest for greater national cohesive- ness and regional income equalization by reaching out to areas populated by minority nationalities. The efforts of extending and improving the rail network have involved major engineering achievements by construction units of the Ministry of Railways and the raillay engineering corps of the People's Liberation Army. From 1978 a shift has taken place once more in rail invest- ment policy, this time away from new line construction to the renovation of older lines, including the double-tracking of major trunk lines in the eastern part of the country. The total investment for this renovation purpose is roughly equal to that for new line building. This change in emphasis will ease capacity constraints in key bottleneck sections. 9. Water transport has traditionally been important in China. Inland navigation canals, including the Grand Canal which connects Beijing with Hangzhou, were started two thousand years ago but were allowed to decay or were damaged by military action in the 1940s. Since then, however, many of these waterways have been reopened to river and canal traffic, so that today 107,800 km are navigable. However, only 57,000 km have a usual water depth of one meter or more, and most of the rivers are still in their natural state, with few port facilities, so that their potential is not yet fully used. (Only 2,700 km of inland waterways are now navigable in vessels of 1,000 tons or more.) Inland water transport accounted for 321 million tons of traffic in 1979, but the average haul was only 170 km, so that in ton-km the inland waterways carried about one-tenth as much traffic as the railways, and only two-thirds as much as coastal shipping, where the average haul in 1979 was 1,232 km. The most important waterway in China is the Chang Jiang which, like the Rhine, Danube and Mississippi, is one of the world's great commercial arteries. It carries ocean-going vessels of up to 10,000 dwt to as far as Nanjing, while in seasons when water is high, ships of 5,000 dwt can reach Wuhan. The river carries a wide variety of vessels including a few modern push-tow barge trains as well as local passenger and freight traffic, and other vessels, to seven designated foreign trade ports and to terminals controlled by central, provincial and local governments and by production enterprises. The 15 ports along China-s 18,000 km of coastline engaged in foreign commerce and under the control of the central government handled 212 million tons in 1979, of which only one third were foreign trade cargoes. At present in these coastal ports there are 313 berths of which about 130 berths are of 10,000 tons and above, with an actual handling capacity of 212 million tons (see Appendix E). Many of these berths are very congested, partly because of a shortage of berths and partly because of technically backward materials-handling equipment. Many smaller ports are under provincial government responsibility and participate only in domestic coastal trade.  C46400/J91841/D1l24/57 - xi - 10. China's ocean and coastal shipping fleet expanded at a faster rate in recent years than that of any other nation. It now amounts to about 640 ships, totalling over 9.0 million dwt, making it about the fourteenth largest in the world. It is estimated that China has spent over $1.0 billion on new and second-hand ship purchases in the period 1976-79. In addition, China has its own shipbuilding industry, which produced 818,000 tons of steel ships for civilian use in 1980. Nationally-owned vessels carry a substantial share of the country's foreign trade. To improve its ports, rivers, canals, and shipbuilding sites, China has built up a dredger fleet of over 500 dredgers and auxiliary vessels with a combined dredging capacity of 100 million m3; about $280 million were invested in new dredgers in the 1975-78 period. A part of this large dredging fleet is underutilized, however. 11. The network of motorable roads increased ten-fold from 80,000 km in 1949 to over 870,000 km in 1979 and was built mainly by provincial, county and commune governments./l Design standards for all roads have been generally low. Main roads do not permit the fast, direct, heavy truck and bus movements found in many places elsewhere. There is less than 200 km of four-lane intercity highways in China, though small additions such as Tianjin-Beijing and Shanghai-Nanjing are planned and appear justified. There is no private automobile ownership, but cars are owned by government departments, enterprises and diplomats. 12. Domestic aviation is still underdeveloped. In 1978, for example, China had 40,000 domestic flights as compared with 85,000 in India. Passengers carried by air numbered 2 million in China and 4.7 million in India. The difference in service frequency is striking - 1.7 flights per day per route-km in India and 0.3 in China. The aviation system is being upgraded, however, with capacity and service increased by the addition of more jet aircraft, more city pairs being added to the domestic network, and more cities being opened to international services. Nevertheless, CAAC has difficulty in keeping up with the growing demand, including the increasing tourist traffic from overseas. Traffic Trends 13. The total annual tonnage of freight carried by modern transport means in China is now over 2.4 billion tons, or 60% more than that carried in 1970 (1.5 billion tons) and three times the volume moved in 1957 (0.8 billion tons). Total ton-km performed in 1979 were 1,042 billion or 5.75 times greater than the 181 billion ton-km in 1957, and 2.3 times greater than the /1 In comparison, India had about 1.2 million km of roads in 1976 (exclud- ing roads under forestry, irrigation, plantation and similar agency jurisdiction).  C46400/J79057/D1124/58 - xii - 460 billion ton-km in 1970. New data for 1980 (with a slightly wider coverage) show that of a total of 1,202.6 billion ton-km (up 5.6% over 1979), 47.5% was produced by rail, 42% by water (including some ocean shipping), 6.4% by road, and 4.1% by pipelines./l However, over one quarter of the total (317 billion ton-km in 1979) consists of ocean shipping with average hauls of about 7,500 km (Table 5.1). Together with the shipping data in the same table this new data implies that with ocean shipping excluded, 68.1% of China's freight traffic of 821.4 million ton-km moved by rail, 10.3% by coastal shipping, 9.1% by road, 6.6% by inland waterways and 5.8% by pipelines. Previous Chinese transport statistics underestimated the amounts of traffic since they relate only to traffic "handled by transport departments" (i.e. specialized transport agencies such as the railway and trucking and bus organizations), and excluded the output of vehicles owned by ministries, agencies, local governments, enterprises and communes. Even the new data continue to exclude traffic by traditional means, which in many countries would go by road vehicle. The water transport statistics, unless adjusted, include ocean shipping transport performed by China's own vessels; and the passenger transport statistics have omissions (para. 16). International comparisons, therefore, are difficult and risky. 14. Rapid growth took place in transport output between 1952 and 1957, when the railways accounted for about 75% of total freight ton-km and some 65% of the tonnages carried. A first peak in transport performance was reached in 1959; then, after a decline to a low point in 1961 as a result of economic slowdowns associated with the Great Leap Forward period, recovery took place up to 1966, only to decline again in the late 1960s due to the disruptions of the Cultural Revolution. From 1970 onwards, however, there has been a fairly steady average rate of growth in total transport output at around 9% p.a. The major long distance traffic flows are raw materials such as coal and oil moving from north to south and from west to east. Coal in particular moves east from the Inner Mongolia-Shanxi area to consumption points in the coastal areas. Some of it moves south either directly by rail, or through the ports of Qinhuangdao, Qingdao, and Lianyungang by coastal shipping. Imports and consumer goods move from the eastern industrial centers such as Shanghai and Tianjin towards the interior. 15. In China, as in other low-income developing countries, domestic freight transport output (ton-km) since 1957 has been increasing faster than the gross value of total output - at least 7.5% average p.a. /2 as compared with roughly 5% p.a., or an elasticity ratio of around 1.5. In other words, a 10% rise in national income is associated with a 15% rise in freight traffic. The growth in traffic reflects the dominance of heavy industry /I See para. 1.13, footnote 1. /2 Figure arrived at by adjusting total for estimated ocean transport; without this adjustment it would be 8.5%.  C46400/J78983/D1124/59 - xiii - which has required bulk movements of such goods as coal, cement, steel and construction materials over distances averaging around 435 km in 1979, or nearly twice the average distance hauled in 1957. The relationship of freight growth to GNP growth is, however, less than that experienced by some other countries at low-income levels, and reflects the development policy involving limited interregional trade in foodstuffs and consumer goods. In India, by comparison, freight traffic grew twice as fast as national income for the first two decades after independence, but the growth rate has tapered off in the last decade, with freight traffic now rising at about the same rate as national income. 16. The rate of increase in passenger traffic in China (6.5% p.a.) has been above that of national income. On the railways the average annual rate of growth in passenger traffic since 1957 has been around 5.5% p.a. Rail and road passenger traffic in India grew at this same average rate during the period 1950-70, but at over 8.0% p.a. in the 1970s. There has been rapid growth in passenger traffic by road in China also, but the data are seriously incomplete, since they exclude urban bus services and long distance passenger traffic to and from Shanghai and Tianjin. Sectoral Investments 17. Over the period 1949-79 some Y 110 billion, or 17% of all new investment coming under the heading 'State Capital Construction', went to transportation. This 17% share is comparable to experience in many other developing countries./l However, this figure apparently excludes renewals which are generally included in capital investments. Similarly, the contribution of transport to GDP in China is of the same order of magnitude (5%-6%) as that in other countries. 18. In the first two decades after liberation the railways absorbed well over 50% of all new investments in the transport sector, but since then the proportion seems to have fallen to around 50%. Total investment in new /1 The Chinese numbers do not include posts and telecommunications, but at the same time, state capital construction excludes a substantial share of China's fixed investment. A study of 45 countries in the early 1970s showed the average percentage share of transport and communications in gross fixed investment to be 15% for countries in the then $1007200 per capita income range; 19% in both the $200-500 range and over $500 range. By contrast, in the USSR and Eastern Europe the average was 12%. There are definitional problems with these statistics. The conclusion of the study was that there is no "golden rule" for how much to invest in transport at any particular stage of development. The sums required will be a function of many factors relating to a country's size, its stage of development, its resource endowment, the location of resources, the levels of industrialization and urbanization, the degree of dependence on foreign trade, etc.  C46400/J78983/D1124/60 - xiv - railway lines construction since 1949 has been estimated at some Y 30 billion. While the railway system was economically and militarily important before 1949, 'the railway age in China has matured only after then, and at a time when the former dominant position of railways in many other countries was being rapidly eroded by a dynamic road transport industry based on declining real prices of fuel. One consequence of China's late railway development is that unlike the US, Western Europe and Argentina, for example, the rail network does not include large numbers of uneconomic branch lines that were built before road transport was a competing alternative. 19. Because of the recent expansion of external trade, increasing emphasis has been given the development of ports and ocean shipping. Investments in ports have totalled about Y 3 billion in the 1970s. Investments in the shipping fleet have been very large, averaging about Y 500 million p.a. since 1976. By contrast, investment in inland waterways over the past 30 years has been only Y 600 million or about Y 20 million per year. 20. The road sector has received secondary attention in the transport scene; nevertheless, some 25,000 km/year have been added to the network, albeit at rather low standards. Only limited information is available on the road network (its location, criteria for building new roads, levels of traffic, etc.), but it is probably safe to say that given the limited funds available the development strategy employed has been reasonable; i.e., maximize km length for the limited money available and upgrade network segments only as traffic development warrants, rather than build capacity well ahead of demand and construct prestige expressways near large cities and international airports. Performance 21. The utilization of the transport system is generally high. This is particularly true in the centrally run railway system, where the discipline of the labor contributes to make it highly efficient as compared with railways in some other countries. The best indicator of the intensive use of the system is the average rail freight traffic density (net ton-km million/route-km), which is much higher than in other major railways, except those of the USSR:  C46400/J79057/D1124/61 xv - Net ton-km/ Passenger-km/ route-km route-km (million) (million) USSR 24.7 2.4 China 10.9 2.4 US 7.7 0.1 Romania 6.9 2.1 India /a 4.5 4.4 Poland 4.2 1.7 Brazil 1.0 1.1 /a Broad Gauge only - on the meter gauge system, 0.9 m. and 1.6 m. for freight and passenger traffic, respectively. Increased productivity of the rail system is reflected in the growth of freight and passenger traffic density per route-km from 2.5 million net ton-km/route-km in 1952 to 10.9 million in 1979 - a 5.5% p.a. increase, with passenger traffic increasing from 0.8 million passenger-km/route-km to 2.4 million in the same period, a 4.5% p.a. increase. 22. The rail network does not appear to have been extended to the point where average traffic densities have begun to fall. Most new lines appear to carry sufficient traffic to meet a rule-of-thumb threshold test (2.0 million net ton-km/route-km) for new line investment. Lack of infor- mation about traffic density on individual lines in China prevents saying whether all new line construction has been economically justified. The few operating statistics available such as rail wagon turnaround time (3 days) suggest an intensive use of railway capital in China. 23. In both the water and road modes, however, equipment seems to be used less extensively than on the railways. This is somewhat in the nature of those modes - many small production units operating independently from the units making decisions about infrastructure investment, and not centrally managed like the railway. As in most countries, the multiplicity of users and the nature of the work done often lead to small unit loads and a less than optimal use of some equipment, in order to provide higher levels of service. In China, however, the division in decision making between operators and infrastructure owners is less clear than in most countries, since provincial transport bureaus both construct and maintain roads and operate fleets of trucks and buses. Still, overall, these bureaus own only about 15% of the vehicle fleet. A significant but unknown amount of trucking and bus transport is done by enterprises on their own account.  C46400/J89537/D1124/62 - xvi - 24. The performance of the system is impressive, given that vehicle technologies in China have not kept pace with those being developed and used in many parts of the world. The railway is mainly steam powered. There are technological problems with diesel locomotives and, to a lesser extent, with electric locomotives. Trucks are small, gasoline powered, and energy inefficient. Airplanes do not operate in bad weather conditions because of limited navigational aids and landing systems. While technologies may be lagging, the general level of maintenance of rail tracks, roads, ports, and of vehicles and equipment is generally quite high. C. Major Present Issues 25. Issues that seem to be presently important relate to the capacity of the transport system; its management, including planning and development; the respective role of various modes and, in particular, the modal allocation of short distance traffic; the role of prices on the sector; the growing demand for passenger transport; the appropriate choice of transport technologies in relation to energy; and, finally, staff constraints and training. Capacity 26. No forecasts of future traffic growth in China were available. However, the elasticity of demand for freight traffic growth is expected to be lower than in previous periods, and might well fall below unity in the period 1980-85, because heavy industry is being de-emphasized. But at the same time, within the total, the increased emphasis on consumer goods is likely to imply a rapid rise in demand for road transport. Despite this shift, increased demand on the railways is likely to be substantial, especially in the second half of the 1980s as coal production rises. Meanwhile, the railway authorities' forecast of a 6% p.a. increase in passenger traffic to 1985 implies over 300 million more passengers in that year, or about 50 billion extra passenger-km, assuming the present average distance travelled per passenger. The level of past passenger traffic in China, however, has been determined largely by the carrying capacity provided and has left a significant potential effective demand unsatisfied. Addi- tional investments that would be needed in infrastructure and equipment and vehicles for the various modes, to move additional traffic in 1985 of the orders of magnitude suggested above, are likely to be substantial and are at the heart of any future national transport plan. Management, Policy and Planning 27. In China, as elsewhere, there are many leading actors in the transport policy and planning process as well as many others who play smal:Ler supporting roles. At the national level, transport is administered  C46400/J79057/D1124/63 - xvii - by two key Ministries - the Ministry of Railways (MOR) and the Ministry of Communications (MOC), which covers national roads, main ports, coastal and ocean shipping, and some inland water transport. In addition, there is the Ministry of Petroleum (MOP) for pipelines; and the Civil Aviation Adminis- tration of China (CAAC), a special agency of the State Council, which runs the national airline. Decision-making in the railways, pipelines and aviation is highly centralized, but in the roads and water transport subsectors, the provincial, county and commune governments as well as production enterprises play very important roles. Transport decisions have to be coordinated, therefore, horizontally at the central level among the major government ministries and agencies, and vertically, between the central ministries and the provinces and lower levels of government. 28. Horizontal coordination seems to take place mainly through the process of approval and scheduling of investment and annual operating plans by the State Planning Commission (SPC) and the State Economic Commission (SEC), with the State Capital Construction Commission (SCCC) influencing the process by its involvement in project design and project implementation, scheduling plans for major projects. Given the limited number of staff dealing with transport planning - 25 in SPC and 30 in SEC - and the wide area of their responsibilities, the amount and depth of analytical and policy work conducted by these bureaus can, at best, be only limited and somewhat superficial. The staff involved rely largely on work done by the operating ministries and agencies (MOC, MOR, MOP, CAAC), and are not equipped to undertake independent investigations and analysis. The recent re-estab- lishment of the Institute of Comprehensive Transportation within the SEC is a significant step towards getting an overall picture of transport developments and analyzing problems from a sectoral rather than a limited modal viewpoint. The venture should be encouraged by providing it with the staff and other resources needed to undertake, among other things, the following functions: (a) surveys from time to time of actual traffic patterns and real transport costs in the different modes; (b) analyses of the factors influencing trends in transport demand; (c) examination of the transport price structure for freight and passenger traffic in each of the modes in relation to their costs; (d) studies of the effects of fiscal policies and subsidies at the Central and provincial government levels to see what, if any, resource allocation dis- tortions are taking place and whether and to what extent objectives are being achieved; (e) monitoring the functioning of the transport system in order to identify promptly impending problems or major imbalances (contradictions) between demand and supply; (f) suggesting appropriate policy principles and prescriptions for the sector to help it achieve national objectives; and (g) establishing cost-benefit appraisal techniques for use by the operating agencies and ministries and in cooperation with their planning units. Information needed for much of the above seems now either scanty, or not available to or productively used by the SPC/SEC in their formulation of transport plans. Strengthening the transport statistical base is a key step in improved transport planning, management decision making, and policy formulation.  C46400/J78983/D1059/44 - xviii - 29. A need for improved coordination at the operating level seems to exist also. For example, there appears to be unnecessary transshipment of cargo in the road and water modes, involving unnecessarily circuitous, energy- wasting journeys. Transport movements are undertaken by a variety of administratively separate operating units, as well as production enterprises, each of which is concerned with meeting planned physical production targets rather than minimizing the total distribution costs of traffic flows. As a result, there has been some unnecessary duplication, and thus underutiliza- tion cf facilities and equipment. However, some excess capacity is necessary in order to provide adequate levels of service for which shippers are often willing to pay a premium price. Transport Pricing 30. As in other sectors, prices in the transport sector in China are set by administrative orders emanating from the relevant State, Ministerial, Provincial or local authority levels. Once set, prices tend to remain fixed for long periods of time. The railway tariff, for example, has been largely unchanged for 15 years. Although the picture obtained on pricing in the system is incomplete, there is some evidence of the following: (a) railway tariffs have a significant effect on regional and, possibly, commodity cross-subsidization; (b) modal tariffs may be producing distortions in the modal allocation of traffic, e.g. some traffic moves by rail that could move more economically by road for short hauls or by water transport for long hauls; (c) short distance passenger rail tariffs do not cover the costs of services and are lower than bus tariffs for the same type of service, thus encouraging short distance rail movement and increasing rail congestion; (d) port prices do not encourage prompt clearance of ships and cargoes; I:e) high trucking prices charged by the transport corporations for very short haul freight traffic have the effect of encouraging traditional transport which, paradoxically, adds to traffic congestion and causes higher social costs for modern transport. 31. Transport agencies in China could benefit substantially from the analytical basis of cost-finding procedures and techniques which have been developed recently - in Canada, for example. Such better understanding of the transport costs for different modes, routes, commodities, seasons,  C46400/J79057/D1059/45 - xix - terrain and so on, will be needed if transport prices are to play greater market-signalling and managerial incentive roles, as being advocated presently in China. Short-Haul Freight Transport 32. Although detailed information on distance distribution of freight movements was not available, a Chinese source indicates that some 23-30% of rail freight moves less than 100 km and 13-19% moves less than 50 km./l The distance below which road transport is economically superior to rail transport is not a simple, unique figure. It depends upon a variety of factors such as the nature and volumes of commodities to be transported; the size and type of vehicles used, and the price and type of fuel they consume; road conditions; the amount of transshipments, etc. Analysis undertaken in China suggests that for distances up to 50 km for a 7-ton truck and up to 70-110 km for a 13-ton truck, the ton-km cost of road transport is lower than for a full rail car load. In other countries, trucking is more cost effective over much longer distances. The implication of the above figures is that there is a potentially larger role for road transport in short-haul traffic which, among other things, would ease some of the congestion in the rail system and reduce transit times. Passenger Transport 33. The people of China are still relatively immobile - about 200 passenger-km per capita per year by modern transport means as compared with, for example, 710 in India in 1977-78, 411 in the USSR in 1950 and 993 by 1965. The low mobility results, in part, from the low density of the transport network and its limited capacity. On some major rail lines there is nearly no room to increase the number of passenger trains or to lengthen them without reducing freight transport. Passenger equipment is also in short supply. In 1979, for example, the railway had only 15,000 passenger cars; and there were only 35,000 passenger buses, or one for every 30,000 people in China - and no private automobiles. 34. The low mobility is a concern for the development of education and other services to rural areas (such as agricultural extension), with low levels of service and difficulty of access to some areas being the object of many complaints. Any modest percentage increase in mobility resulting from increasing incomes and population growth will generate very great pressures on all transport modes, in terms of absolute numbers of people wanting to travel. For example, a continuation of the roughly 6% p.a. long-term passenger growth rate implies almost doubling by the end of the 1980s. Such a growth rate is entirely consistent with experience elsewhere. /1 "Rational Allocation of Short-Haul Transport between Rail and Road," Qi Yong, Beijing, 1980.  C46400/J78983/D1059/46 - xx - One option open to the Government is to make modest improvements and let poor service standards act as the rationing system to cut the demand, but this would add to what is already a frustrated or pent-up demand situation in passenger travel, with adverse public reaction. Alternatively, the Government can make a policy decision to meet a substantial amount of the demancl. To do so will mean that the vehicle manufacturing, road improvement and energy implications of increased road transport must be confronted as major policy decisions. It will also mean a greater use of prices to influence transport demands and provide the revenues for the generation of funds to invest in the system. Transport and Energy 35. Although China, unlike many developing countries, is not at present a net energy importer, energy supplies are expected to be one of the principal constraints on China's growth in the 1980s. The role of the transport sector in the energy scene of China, therefore, needs examination. First., opportunities must be taken to encourage a more efficient use of energy consumption in the sector. Their effect will be modest relative to total energy use, because the transport sector accounts for only about 5% of the total commercial energy consumption, but the sector's share is higher at 16%, and is rising, in petroleum and its products, which will be especially scarce. Secondly, the differences between transport modes in types of energy used and in relative energy intensiyeness (i.e., the energy input needed to produce a ton-km or passenger-km) have important implications for policy decisions relating to motive power and, particularly, the relative rates of dieselization and electrification on the railway and the extent of dieselization in the road transport industry. Decisions about these have, in turn, important implications for vehicle equipment manufacturing. Thirdly, since very large volumes of coal (and lesser amounts of coke and petro:Leum) are handled by the railways, ports and coastal shipping, the efficiency and transport capacity available in handling fuel are relevant to major decisions that have to be taken within the energy sector itself (e.g., mine-mnouth versus load center electricity generation; coal washing before transport; the size and timing of contracts for coal exports). Transporta- tion of coal is now said to be a principal bottleneck limiting China's abililty to mine and distribute coal, particularly in Shanxi and adjoining provinces, where coal reserves are huge and extraction is relatively cheap. 36. In 1979, of the 5% of total energy consumed by the transport sector, rail used roughly 40%; roads 47%; and water 13%. The small share of transport in China's total energy consumption contrasts sharply with experLence elsewhere. For example, in high and middle income countries, the share is typically in the 15-25% range, and it is in the 10-20% range in low income countries. In many countries, road transport accounts for 70-85% of the energy consumed directly by the transport sector, with rail and air transport consuming about 3-5% and 5-10% respectively. China clearly is different. The role of railways is much more important than in any other  C46400/J78983/D1059/47 - xxi - large economy, and road transport is of lesser significance than elsewhere, particularly since there is no private automobile ownership. One consequence is that unlike in many Bank member countries, the level of gasoline pricing for automobile use is not a major issue - the average price for gasoline in China is estimated to be 70% above the "international price." Nor, since there are very few diesel trucks, is the question of the relative prices of gasoline and diesel significant as yet in the development of domestic truck and bus manufacturing and transport industries. Looking forward over the next few years, however, the demands of the transport sector, and particularly road transport, are projected to be the fastest-growing element in China's demand for oil, and as a result will have a large impact on the net trade balance in oil, which in turn will strongly affect the balance of payments in oil. Already in 1980, transport was responsible for about 16% of China's consumption of petroleum products. By 1990, in some scenarios, this share would reach 30%./l 37. Chinese experts estimate that perhaps 40% of the energy consumed in the sector could be saved by feasible technology, policy and management changes. Such changes would include reducing steam traction on the railways in favor of electric and diesel traction; meanwhile improving the heat efficiency of the steam locomotives, if only by elementary steps such as burning pre-sorted coal; developing more efficient gasoline trucks and larger diesel trucks; increasing the use of enterprise trucks as public carriers to reduce empty running; improving roads, driving skills and vehicle maintenance; reducing transshipments; shifting traffic from land to water transport while making needed improvements in the inland waterway and port system; increasing the use of storage to reduce seasonal peaks, etc. While many of these improvements require major investments, and would take time to yield significant energy savings, a few require managerial and operational changes that should be well within the capacity of the authorities and agencies involved. 38. China's railway is exceptional among the world's major railways in that 78% of its locomotive fleet consists of steam locomotives, with 20% being diesel and 2% electric. Chinese railway experts know that burning coal in steam locomotives is a low-efficiency, uneconomic form of coal utilization, and that the route to fuel efficiency is towards the higher heat efficiency of diesel and electric locomotives which also provide increased line capacity over steam operation. The practical problems, however, relate to such questions as how fast the changeover should be, how much of each should be used, on which lines first and at what costs, how fast maintenance repair and maintenance facilities can be converted; and what would the implications be for the phasing down of steam operations and locomotive production. The question of locomotive power choice is a complex one with economic, technical, social and financial implications that go beyond the internal aspects of railway management and operations. There are not only spillover effects /1 See Main Report, Table 6.5 and para. 6.74.  C46400/J78983/D1059/48 - xxii - into the electricity supply, petroleum and coal producing industries, but also environmental, labor and national security issues. Any decision must recognize the "trade-offs" involved and price correctly inputs such as labor and the alternative energy types, in terms of their opportunity costs. In the longer run, electrification is the solution for many of China-s heavy traffic lines, but at this point the railways do not seem to have a firm, detailed plan for the modernization of motive power. To maximize the impact of the gradual introduction of electric traction, such a plan should be developed which, among other things, would cover the production of modern, efficient locomotives suitable for the operating conditions of the system that is closely harmonized with rail line improvements where these are justified. Such a plan should also include a time-phased strategy for the use of diesel in the short to medium term and the gradual phasing out of steam. 39. Chinese trucks have low fuel efficiency; their consumption is reported to be 15% higher than for the same type produced elsewhere but, at least, they do run on very low octane gasoline. One Chinese estimate is that a 10% reduction in the fuel consumption of trucks would save annually 800,000 tons of gasoline, or the equivalent of some $250 million at current international prices. Investments to achieve such savings would seem to give a good and quick "pay-back." Larger size diesel trucks also need further development for specialized functions such as handling containers. However, because of technical problems with diesel engines in China, the wax content of diesel fuel, and the limited potential for increases in diesel fuel supply, the prospects of a major shift to diesel power in road transport in the short run are not high. But this is the longer run direction towards which progress is necessary. 40. Coal shipments of over 400 million tons account for 38% of the total tonnage moved by rail in China. This compares, for example, with 33% in India (1977-78); 32% in the US (1979); and 30% in the USSR from 1928-53. Coal is the main source of energy in China and will continue to dominate the whole transport system for many years. Given the present limited oil prospects, if coal production is assumed to increase at, say, 4% p.a. for the next decade, and the current transport coefficient for coal continues to apply, coal traffic on the railway would amount to 600 million tons in 1990, an increase of about 45%. To move this additional traffic would require substantial rail investment, particularly if present coal marketing distribution and transportation practices continue unchanged. The amount of investment required, however, can be reduced by measures such as (i) an increase in the washing of coal prior to shipment; (ii) more mine-mouth generation of electricity; (iii) the introduction of larger size unit coal trains; (iv) some increase in dieselization on the railway; (v) an increased use of water transport; and (vi) the use of slurry pipelines - if these are demonstrated to be superior in economic and technical terms in China and do not divert large quantities of water which would be needed in agriculture.  C46400/J89537/D1059/49 - xxiii - 41. The suggestion has been made within China to set up an organiza- tion to carry out major comprehensive studies related to energy production, consumption, and distribution, and to make recommendations for consideration by decision-making bodies. The idea of comprehensive analysis of the use of coal, including its transport, has great merit. Employment and Training 42. In China about 7.5 million people are employed under the broad heading "transport" - railways, 2.5 million; road, over 3 million; water transport, about 1.8 million; and the balance in aviation and other modes. These figures do not include the traditional transport sector, but they include personnel involved in services such as housing, health and education provided by the transport agencies. Until disaggregated data is available, it is not possible to make meaningful labor productivity comparisons between transport in China and in other countries. 43. The importance of trained personnel to manage, operate, advance technical knowledge and undertake planning and investment studies in the transport industry cannot be overstated. This is well recognized in China, and significant efforts are now being made to overcome the shortages in trained personnel resulting from the neglect of training and technical education during the Cultural Revolution. The efforts, however, do not seem to be commensurate in size with the immense task needed to overcome the backlog of missed training and to meet the needs of a growing future transport system. Nor are they sufficiently oriented to interdisciplinary studies, economic analysis and management decision making. To the mission-s knowledge there is no institution in China which imparts training to those who have to look at the transport system as an integrated process and provide the policy and planning frameworks for its evolution in a coordinated way. To stimulate such training, and associated applied research studies, a national level center or transport institute seems desirable, as well as an increased study of different aspects of transport technology, planning and operations in the universities. In addition to such formal education, short-term courses are needed in China, and visits abroad are desirable, to foster the professional development of existing staff. In this respect, the Bank's Economic Development Institute might be a partner. D. Conclusions and Recommendations Conclusions 44. While the mission collected a considerable amount of statistical information, gaps remain in the information available. Therefore, the following conclusions and recommendations are tentative and qualitative rather than quantitative.  C46400/J78983/D1059/50 - xxiv - 45. In general, many of the recent policy decisions in the sector appear headed in the right direction. To cite a few: the growing emphasis on investments for passenger services in the railways; the authorization of enterprise-owned trucks to perform for hire services, thus reducing empty back hauls; and the opening of the Chang Jiang ports to international trade, although for the moment they are limited to Chinese ships only./1 Government staff dealing with transport appear well aware of the major issues. 46. Regarding development of the railways and highways sectors, the emphasis on consolidation of the existing system rather than on further major expansion (reflecting the general economic policy of adjustment) seems appropriate. Most main rail projects now under construction or currently planned emphasize capacity increases on existing lines rather than new line construction, and new efforts at large-scale extensions of the network may only take place again in five to ten years. For roads, it appears that a number of sections are beginning to reach congestion levels at their present design standards. While the highway network will continue to be extended, at relatively low standards, to connect areas presently not accessible by motor vehicles, a large portion of the road investment can be expected to go for upgrading existing roads. 47. Although the above consolidation approach for rail and roads appears adequate, it needs particularly careful assessment in the ports sector and in regard to inland waterways. The world trend in external trade and coastal shipping has been to move from estuarial to coastal locations so as to faci- litate access of larger ships, while curtailing maintenance dredging expen- ditures. The mission recommends serious investigation of the further possi- bilities for developing deep water ports either at some existing port sites or at some new locations as part of a national port strategy and plan. At the same time, however, China can almost certainly benefit from the increased attention expected now to be given to the improvement of selected inland waterways and associated port facilities. 48. Regarding future transport demand, no forecasts are available. Qualitatively, it is clear that the new economic policies will affect transport demand in total as well as structurally. The proposed shifts in emphasis from heavy industry to light industry and agriculture implies a lesser growth rate than in the past for the transport of bulk commodities such as coal, ores, steel, etc., and a faster growth rate for light industry /1 Their concern about them can be illustrated by some of the titles of multi-agency meetings attended by people from all over the country which took place in 1980: "The National Academy Forum on Pricing Policy for truck Transport and Short-Haul Rail Transport;" "The National Conference on Energy and Transport." Papers have also been prepared on the need to pay special attention "to Travel in the Life of the People" and on the "rational allocation of short-haul traffic between rail and road."  C46400/J78983/D1059/51 - xxv - products and foodstuffs. Since these products usually go shorter distances and between many dispersed origins and destinations in small size shipments, they will be more suitable to road transport than to rail transport. The relaxation of centralized management of the economy, combined with growing incomes, will also generate higher passenger travel demand, much of which will have to be carried by the railways and water transport, but much will have to travel for short distances by bus and for longer distance by air. The development of air transport should be given more emphasis as an important element in the four modernizations process. 49. The Chinese railways are conscious of the implications of recent development policy changes and should be supported in their effort to expand and improve passenger services. This does not mean neglecting freight transport of bulk commodities, however. These will continue to grow, albeit at somewhat reduced rates. Regarding roads, it is unclear whether sufficient recognition has been given to the demand potential for road transport as a result of the policy changes, together with the need to change the mix of short distance traffic modes. A time-phased plan might usefully be developed to improve and pave roads with traffic in excess of some 300 vehicles/day and to widen the few major intercity links where traffic is already approaching 5,000 vehicles/day. 50. In view of the above conclusions, the mission makes the following recommendations regarding investments, institutional and managerial changes, and opportunities for foreign assistance and advice. For each of these topics, recommendations are arranged by modes, unless recommendations apply overall. More detailed discussions are in the modal chapters of the report. Recommendations for Investments 51. Railways. Over the long term, the phasing out of steam traction and its replacement by electric and diesel traction is to be expected. Many lines (possibly 10,000-15,000 km) are already at, or above, the economic threshold which would economically justify electrification, with its higher initial capital cost but lower operating cost than diesel. The cost of line electri- fication alone, i.e. catenary and substations, is between $100,000 and $150,000 equivalent per route-km of single track. The cost of signalling and telecommunications generally associated with electrification, and of civil works, will depend greatly on the system selected and the type of area traversed - mountains, plains, urban areas, etc. In typical cases these signalling and communications costs would roughly double the above figures for line electrification proper. Electrifying 10,000 km at $250,000/km would thus mean $2.5 billion equivalent. Electric locomotives (about $1 million equiv- alent each) would add roughly another $2 billion equivalent. It is clear that a time-phased plan must be developed to coordinate both line electrifi- cation, where this is justified, and the production of the needed amounts of modern, efficient locomotives suitable for particular operating conditions of the system. This motive power plan, as suggested earlier, should also include  C46400/J78983/D1059/52 - xxvi - a strategy for the use of diesel in the short and medium term as transition steps towards the ultimate electrification of large parts of the system. Diesel locomotives (3,000 hp) are estimated to cost about the same as electric locomotives, or about $1 million each. 52. Investments are urgently needed on rail passenger services including passenger stations, some line and signalling modifications, and the type of equipment that will give the railways more operating flexibility, particularly for short distance travel in the vicinity of large cities. 53. Some investments are also needed to improve transport and handling of coal and other bulk material to ensure rapid and efficient loading and unloading of cars, operation of through and block trains, etc. We are not in a position to estimate these on the basis of present information. The need for investments in technology are dealt with under opportunities for foreign assistance below. 54. Roads. Besides the continuous extension of the system at low rural road standards to areas presently not accessible by motor transport, there is a need to develop a time-phased plan for the improvement of, say, 1,500 km of existing two-lane roads with traffic volumes already in excess of 3,000 vehicles/day, and also to improve and pave another 80,000 km of unpaved roads on which traffic already exceeds 500 vehicle/days. Failure to pave these roads will cause vehicle operating costs, including energy consumption, to be far in excess of the costs of paving. To upgrade these roads could cost $100,000-150,000/km depending upon local conditions. Thus 80,000 km would mean $8-12 billion investment, in addition to expenditures for the 1,500 km of four-lane roads. Many bridges also need upgrading and replacement, and a time-phased program with priorities should be developed. Technological improvement to road vehicles are dealt with below. 55. Water Transport. The natural conditions of many of the rivers in China that do not already carry heavy traffic are extremely promising for transportation purposes; and already very large tonnages are carried on the rivers and canals, compared to the amounts of money that have been invested in improving and maintaining them, or in building ports and infrastructure. Investments at levels well above the tiny levels of the past would probably have high rates of return, particularly where entire river and port systems can be systematically upgraded without neglecting any crucial aspect. China has chosen as its top priority for the near future the development of the Xi Jiang to enable barges with loads of 1,000 tons to go back and forth between Guangzhou and Nanning. Meanwhile, the Huai He and the Grand Canal are also being improved in order to facilitate the shipment of bulk minerals such as coal and ore. 56. Because of the congestion and delays in some of China's leading ports, there is a clear need for substantial further investment directed principally into construction of terminal facilities, including equipment  C46400/J78983/D1059/53 - xxvii - for handling of containers and of bulk materials. There is also a need to emphasize the development of deep-water ports so as to take advantage of the economies associated with larger ships, as well as lower costs of dredging and port maintenance, compared to estuarial ports. These general points are already recognized in China, but medium- and long-term plans should be prepared carefully as soon as possible to increase the coherence of the investment program in this area. Recommendations Regarding Institutions and Management of the Sector 57. Although planning and coordination in the sector is weak, the general overall performance of the system has been good. This is largely because China started in 1950 at a very low level and many of the investment needs were fairly obvious. In any case, finely detailed transport planning and coordination is both impossible and undesirable in a country as vast and diverse as China. Attempts to do so would often result in delays, rigidities, low level of service, etc. 58. Nevertheless, improved planning and coordination is needed to ensure that best use is made of existing infrastructure and equipment and that more uniform criteria of economic evaluation, technical standards, designs and investment and timing are applied in project analysis work. Detailed suggestions are given in the concluding sections of each modal chapter of this Annex. 59. There are opportunities for coordination improvement at many points in the transport system but this is probably most evident in water transport and, to a lesser extent, in road transport, where multiple transshipments are currently very costly. It has to be recognized, however, that the large cast of actors in these subsectors makes physical coordination efforts difficult. Therefore, incentives and signals such as meaningful prices are needed to ensure the actors respond in rational ways, consistent with their assigned tasks.. 60. The question of pricing deserves particular attention. To this end, the mission recommends costing studies in all modes to serve as a basis for examining opportunities for changes in the price structure in the system which would improve modal allocation and, in particular, shift short haul traffic from rail to road and further increase the role of water transport. Opportunities for Foreign Assistance and Advice 61. Technology. Application of modern transport technology in China has lagged behind development in the rest of the world in a number of areas and China would seem to need to catch up in: (a) locomotives - both electric and diesel;  C46400/J78983/D1059/54 - xxviii - (b) specialized rail passenger equipment for short distances; (c) trucks at both ends of the spectrum - small and heavy - and for the heavy trucks diesel rather than gasoline powered; (d) barges which can be ocean going and also travel inland, thus minimizing the need for transshipment and, possibly, ship- building; (e) engineering standards for roads, ports, and dredging works including modern hydraulic studies; (f) telecommunications, route navigational aids; (g) materials and bulk handling equipment linking transport modes; and (h) management information systems. Some technology such as that for vehicles can be acquired from abroad; in other cases, such as in engineering and management, it is more a matter of training and exposure through visits by Chinese engineers/economists abroad and by foreign experts to China. 62. Studies. Studies of the type that are commonly done by consulting firms in other countries will probably have to be carried out by research institutes in China with the assistance of foreign experts in specialized fields. A number of relevant studies are mentioned in the modal chapters. The most urgent ones appear to be those referred to in previous sections such as the use of coal, including its distribution and transport; the intermodal allocation of traffic, especially for short-hauls; the economic and social benefits of the secondary and tertiary road networks to provide greater access to areas not well served by modern transport; a motive power plan for the railways; and a master plan for ports, particularly for developing deep water ports away from river estuaries.  C46400/J79111/D1029/63 1. SECTOR DESCRIPTION AND TRENDS A. The System 1.01 Technologically, China's transport sector is a dual economy with traditional means such as pack animals, human porters, animal or laborer drawn or pushed carts, and wind powered sampans and junks existing in large numbers alongside a growing, modern transport system (see maps, IBRD 15512R and 15528R). Although these traditional forms are slow and expensive they are clearly important in short distance freigh movement, particularly in the densely areas of the mountains and border provinces animal (e.g., camel) transport is still used for longer hauls. The tradi- tional sector is retreating, however, in the face of the growing amounts, wider geographical penetration and greater efficiency of capital intensive modern transport technology./l Nevertheless, traditional means remain a significant feature of the transport scene, not least because in mixed traffic situations they reduce the capacity potential of increasingly high cost modern infrastructure, vehicles and loading/unloading equipment. 1.02 The continued significance of traditional transport reflects capital scarcity in China generally but, more importantly, it follows from a deliberate national development policy of technological dualism or "walking on two legs," as it was officially termed. This dual policy has not been limited to the usual technology and factor proportions aspects in equipment choice and construction techniques resulting from an abundance of low wage labor. More broadly, China has concentrated much of its investment resources on the development of a modern, large-scale capital intensive industrial sector, with its surpluses being largely reinvested for continu- ing the growth of the modern sector itself and only a modest diversion of output to the rural sector. Expansion of the rural sector, therefore, has been based heavily on its own output and savings, after contributing to the growth of the modern sector. Small-scale industry was developed in the /1 Ta Chung Liu and Kung Chia Yeh, "Preliminary Estimate of the Chinese National Income...1952-59," American Economic Review, Vol. LI, May 1961, p. 40, suggest that in 1952 "old-fashioned transportation" accounted for 3.8% of China's net domestic product and "modern transportation and com- munications" for 2.9%. By 1957, they estimate the modern sector's share had grown to 4.0% and the traditional sector's had fallen to 2.5%, although its absolute contribution was about the same as in 1952. After an allowance of 1.0-1.5% for "communications," the total share of old and modern transport in both years is broadly consistent with the 5.0% or so contribution of transport to national product in many countries. The shift from old to modern transport has clearly continued, but no figures were. available as to their relative importance today. Before 1947 it is reported that 70% of all inland and coastal traffic was moved by junks, but by 1979 junks carried less than 8% of the tons of goods carried.  C46400/J79057/D11S/15 -2- rural areas, using simple machinery, local labor and raw materials, to satisfy rural demands for some consumer goods and agricultural tools and equipment. The policy of dual development, reinforced by efforts aimed at regional and/or provincial autarky for wider national political and strategic reasons, required a matching transport system one part of which concentrated on meeting the needs of the heavy, modern industry and machine building sector and the other part on short distance rural distribution and production needs. The policy of dualism also required a new organizational instrument in the rural areas - the commune system. From 1958 onwards, the communes became very important not only for their well-known agricultural role but also for the construction of rural investment projects, including canals and roads, based on traditional labor intensive and simple transport technology. The communes have slowed the pace of change away from tradi- tional transport means by limiting the spending of the income surpluses from their production on motor vehicles, taking into account the need to find temporary or seasonal employment for labor. 1.03 In the modern sector a wide variety of improvements and additions have been made to the infrastructure, terminals, signalling and operating equipment subsystems of each of the different transport modes. These have permitted the growing transport demands - primarily of heavy industry and, only secondarily, of light industry, agriculture and passengers - to be met with greater efficiency and at lower unit resource costs. The improvements have helped to bring large numbers of Chinese people, particularly in the eastern half of the country, into the orbit of an exchange economy even though for many of them this is still very local in area and size. The improvements have also helped to move food from the ports to areas which, in the past, often suffered severe food shortages that were met, if at all, only by emergency famine relief measures. In practice, the emphasis of central government investment in modern transport has been concentrated on the railways, ports and the Chang Jiang to move the coal, coke, iron ore, steel, oil, cement and other inputs needed by heavy industry ("steel is the key" slogan) and the finished products and outputs used by large-scale development projects concentrated in a few key centers, and on satisfying military objectives./l 1.04 By contrast, the network of motorable roads which increased more than ten-fold from 80,000 km in 1949 to over 870,000 km in 1979 was mostly built by provincial, county, and commune governments./2 Design standards /1 UJnder these conditions, the performance or efficiency measures used by planners have taken the form more of physical capital productivity ratios (e.g. output per route-km of rail; tons per meter of port berth, etc.) rather than cost minimization/revenue surplus measures. /2 In comparison, India had about 1.2 million km of roads in 1976 (exclud- ing roads under forestry, irrigation, plantation and similar agency jurisdiction), of which only 29,000 km were classified as national highways and 98,000 as State highways, with the rest being low standard district and village roads.  C46400/J89795/D1018/16 -3- have been generally low but they have permitted shifts to take place away from traditional transport to locally oriented tractor/jeep and robust small size general truck operations. The provincial capitals and other large towns have been connected by road with each other and with Beijing. These roads are also of modest design standards and do not permit fast, direct, heavy truck and bus movements. There is less than 200 km of four-lane intercity highways in China, though small additions are planned. In and around the periphery of major urban areas and larger ports, modern aircondi- tioned tourist type buses and large load carrying specialized trucks are beginning to appear, but still in small numbers. The number of motor vehicles is relatively small compared to other countries. There is no private automobile ownership, but cars are owned by government departments, enterprises and diplomats. 1.05 About 107,800 km of waterways are navigable. However, only 57,000 km have a usual water depth of one meter or more, and most of the rivers are still in their natural states with few port facilities, so that their potential is not yet fully used. Only 2,700 km of inland waterways are now navigable in vessels of 1,000 tons or more. Inland water transport accounted for 321 million tons of traffic in 1979, of which 46 million tons were moved by the Chang Jiang Shipping Authority; but the average haul was only 170 km, so that inland waterways only carried 5.5 billion ton-km or 10% as much as the railways. The largest, most developed, and most important waterway in China is the Chang Jiang, which, like the Rhine, Danube and Mississippi, is one of the world's great commercial arteries. In addition to local freight and passenger traffic, it carries ocean-going vessels of up to 10,000 dwt as far upriver as Nanjing, and in the seasons when the water is high, ships of 5,000 dwt can reach Wuhan. A vast array of other crafts, large and small, including some modern push-tow barge trains, are also used. The river has seven designated foreign trade ports, 25 terminals controlled by the central government, and many others that come under the jurisdiction of production enterprises, provincial and local level authorities. Along China-s 18,000 km of coastline there are-15 ports engaged in foreign commerce that are under the control of the central government and handled 212 million tons in 1979, of which only one third were foreign trade cargoes. However, because of the longer distances involved (averaging 7,469 km), oceanic shipping accounted for 317 billion ton-km compared to 84 billion in coastal shipping (where the average was 1,232 km). At present there are 313 berths in coastal ports, of which about 130 berths are of 10,000 tons and above, with an actual handling capacity of 212 million tons (see Appendix E). Many berths are very congested, partly because of the shortage of berths and partly because of technically backward materials-handling equipment. Many more smaller ports are under provincial responsibility and participate only in domestic coastal trade. Large ports such as Shanghai, which is one of the largest ports in the world (80 million tons of cargo in both directions combined), handle vessels carrying containers, bulk-cargo and petroleum.  C46400/J89537/D1018/17 -4- 1.06 In recent years, China-s ocean and coastal shipping fleet has been expanding at a faster rate than that of any other nation. It now amounts to about 640 ships, totaling over 9.0 million dwt, making it about the fourteenth largest in the world. China is estimated to have committed over $1.0 billion on ship purchases from 1975 to 1979. Since then, a further $0.3 billion is estimated to have been spent on new and second-hand ship purchases. In addition, China has its own shipbuilding industry which produced 818,000 tons of steel ships for civilian use in 1980. In the process of improving its ports, rivers, canals and shipbuilding sites China has built up a dredger fleet, including auxiliary vessels, of over 500 vessels, with a total dredging capacity of about 100 million m3. Some of these dredgers are used on projects in other developing countries such as Malta, Mauritania, Burma and Tanzania. Reportedly, about $280 million has been invested in new dredgers in the 1975-78 period, but a part of this large dredging fleet is underutilized. 1.07 For a country of China's geographic size, population and per capita income level, domestic aviation is still underdeveloped. In 1978, for example, China had 40,000 domestic flights as compared with 85,000 in India. Passengers carried in China numbered 2.0 million and 4.7 million in India, although total passenger-km in China were approximately 50% of those in India because of larger average flight lengths. The difference in service fre- quency, however, is striking and can be seen in the number of flights per route-km - 1.7 in India and 0.3 in China (see Table 1.1). The aviation system is being upgraded, with capacity and service increased by the addition of jumbo (Boeing 747-SP) and other jet aircraft; by a greater number of city pairs being included in the domestic network of 150,000 route-km; and by more cities being opened to international services. Nevertheless, the CAAC has difficulty in keeping up with the growing demand, including that of an increasing tourist traffic from overseas. Table 1.1: DEVELOPMENT OF DOMESTIC AIR SERVICES - CHINA AND INDIA (i) Traffic Passengers carried Passenger-km No. of flights China India China India China India -- ( 000) -- - (million) - -- ( 000) -- 1978 2,000 4,752 2,790 3,685 40 85 1979 - 5,088 3,500 4,011 - 80 1980 -- 4,000 - -  C46400/J79070/D1018/18 -5- (ii) Route Structure Average flight length Flight density Kilometers Hours Flights per route-km /a China India China India China India 1978 800 510 - 1.2 0.3 1.8 1979 - 520 - 1.3 0.3 1.7 1980 - - - - - /a Route length 1979: China - 160,000 km India - 46,000 km Source: Indian and flight length data from the International Civil Aviation Organization. Other chinese statistics from the State Economic Commission and State Statistical Bureau communiques on plan fulfillment in 1978, 1979 and 1980. 1.08 The railways in China are the major carrier in the modern tranport sector. Their development illustrates well the progress since 1949. The rail system has more than doubled in size over the last 30 years from 22,000 route-km to about 50,000 km, of which 6,000 km is continuous long- welded rail, and 8,000 km are double-tracked./l In 1949, about 50% of the lines then in existence were unusable because of war damage and neglect, more than 130 different types and weights of rail existed, and uniform axle loadings, through services, and the easy interchange of rolling stock were not possible. The locomotive fleet then comprised about 4,000 steam units of 110 different foreign built types. There were over 700 different kinds of freight wagons and passenger coaches in a fleet totalling 60,000 units. By 1979, other than for a small number of meter gauge lines near the Vietnam border, China had a technically uniform and integrated rail system. The fleet consisted of some 10,000 locomotives (78% steam; 20% diesel; and 2% electric), 260,000 freight cars and 15,000 passenger coaches. This fleet which since the 1950s has been largely Chinese built, carried slightly under 1.1 billion tons of freight (38% of which is coal) and 0.8 billion passengers for 559 billion ton-km and 121 billion passenger-km./2 China is /1 In 1854, the US had about 22,000 route-km of rail. The USSR had the same amount in 1878. India, which had about 53,000 km in 1950, now has slightly over 60,000 route-km. /2 In comparison, Indian Railways performed 163 billion ton-km and 177 billion passenger-km in 1978 and carried 210 million tons and over 2.0 billion passengers (excluding suburban commuter traffic).  C46400/J79057/D1018/19 -6- the third largest rail freight transport country in the world, after the Soviet Union and the United States./I While China's rail network is now the fifth longest in the world, it is still relatively modest in relation to the size of its population and productive area. The network, for example, is about 20% the size of that in the USA, 35% of the USSR's, and 20% smaller than India's. 1.09 In 1949, about 60% of the total 22,000 km of rail lines of differ- ent gauge and types were concentrated in the northeast and coastal regions, and the emphasis in railway investment in the early 1950s was on their rehabilitation - the tying together into a coherent standardized system, though important new lines such as Chengdu-Chongqing and Yingtan-Xiamen were completed. After the failure of the Great Leap Forward in 1960, attention shifted to the improvement of existing routes and repairs of rolling stock. Major capital construction was not resumed until the third Five-Year Plan (1966-70) commenced. The resulting surge of line construction lasted until 1974. The pattern of new rail construction reflects a mix of objectives. Rail penetration into Xinjiang, for example, seems to have been influenced by the search for petroleum; the needs of the nuclear sector for remote testing sites; a quest for greater national cohesiveness and regional income equalization by reaching out to areas populated by minority nationalities; and, initially, to link with the USSR system, though this was not completed. The process of extending and improving the rail network has involved major engineering achievements in tunnelling and bridge construction in difficult terrain, soil, river and climatic conditions by the construction units of the Ministry of Railways and the railway corps of the PLA./2 Large, productive areas such as the Sichuan, Yunnan and Guizhou provinces which were formerly isolated have been linked with other parts of the country. From 1978, however, a clear shift has taken place in rail investment policy away from new line construction to the renovation of older lines, including the double-tracking of major trunk lines, with total investment for this purpose roughly equal to that for new line building. This needed change in emphasis will ease a number of capacity constraints in key bottleneck sections. /1 The 1979 tonnage carried on the China's railways was equivalent to all the rail freight originating in West Germany, France, the UK, Spain, Switzerland, the Netherlands and Japan combined or that in Poland, Hungary, East Germany and Romania combined. /2 For example, the rail and bridge over the Chang Jiang at Nanjing; the 669 km Baoji-Chengdu line with 303 tunnels totaling 84 km and 994 bridges totaling 27 km; and the 901 km line from Xinjiang to Chongqing, 45% of which consists of bridges and tunnels.  C46400/J91841/D1018/20 -7- 1.10 China has 30 cities with populations of over 1.0 million people, totaling 100 million people in all, making it one of the largest urbanized countries in the world. In these, and many smaller cities, the number of buses is growing but the bicycle remains the major means of transport. For example, over 2.5 million bicycles are registered in Beijing and the numbers are increasing by over 100,000 per year. Bicycle production in China exceeds 10 million units annually and there are over 100 million cycles in the country. The absence of private automobiles and the generally low level of motorization have restrained pressure to build highways with high design standards in order to ease the 'urban transport problem' (congested peak hours caused by journies to and from work), which is common in most industrialized countries and some large cities elsewhere in the developing world. 1.11 There are about 11,000 km of pipelines in China at present, of which 6,900 km were built in the last decade. This system, which has involved some Y 2.25 billion in expenditures, has eased the burden of oil traffic movement for the railway somewhat, but there are irrationalities in the distribution of refineries./l 1.12 In summary, there has been obvious tremendous physical progress since 1949 in extending and improving the transport network and increasing equipment capacity. After the break with the Soviet Union, this was done without foreign assistance, though selected amounts and types of foreign equipment were imported on 'commercial' terms and, in some cases, copied and improved upon for use in local conditions. B. Trends in Transport Performance Historical Growth 1.13 The total annual tonnage of freight carried by the various transport means in China is now probably over 2.4 billion tons. This is about 60% more than that carried in 1970 (1.5 billion tons) and some 3 times the volume moved in 1957 (0.8 billion tons). Total ton-km performed in 1979 were 1,042 billion or 5.75 times greater than the 181 billion ton-km in 1957 and 2.3 times greater than the 460 billion ton-km in 1970. New data for 1980 (with a slightly wider coverage) show that of a total of 1,202.6 bil- lion ton-km (up 5.6% over 1979), 47.5% was produced by rail, 42% by water, /1 Described recently in a Chinese internal document of the Chinese Trans- port Economics Research Commission as "too many in the northeast, too close along the Chang Jiang, too few in the southwest and too big near Beijing." One result is that "seven million tons of finished petroleum products from the northeast pass through Shanghai, and on the Chang Jiang crude and finished products pass by one another in a steady stream."  C46400/J89537/D1018/21 -8- 6.4% by road and 4.1% by pipeline./1 Chinese transport statistics, however, are not without problems. For example, most published figures for road transport relate only to traffic "handled by transport departments," i.e., specialized transport trucking and bus organizations. They exclude, there- fore, two important groups of road transport: that by traditional means which, in industrialized countries, at least, would go by road vehicle, and the work of vehicles owned by ministries, agencies, enterprises and communes. While this latter group of vehicles accounts for the bulk of the fleet, many of them are small pickup minibus types and are not comparable to trucks with carrying capacity four tons and above and standard size buses owned by the specialized transport departments; and they are said to carry much less traffic in total than the fleets of the specialized transport departments. Passenger statistics exclude urban bus service and longdistance passenger traffic to and from Shanghai and Tianjin. The water transport statistics include ocean shipping transport in Chinese-owned ships. International comparisons, therefore, are difficult and, at best, risky. 1.14 Scattered evidence suggests that rapid growth took place in transport output between 1952 and 1957, with the railways then accounting for about 75% of total freight ton-km and some 65% of the tonnages carried. A first peak in tranport performance was reached in 1959; then, after declining to a low point in 1961 as a result of economic slowdowns of the Great Leap Forward period, a recovery began up to 1966, only to decline again in the late 1960s due to the disruptions of the Cultural Revolution. From 1970 onwards, however, there seems to have been a fairly steady average rate of growth in total transport output at around 9% p.a. /1 The communique on the results of the 1980 plan as released by Xinhua News Agency on April 30, 1981, show 1,202.6 billion ton-km of freight volume (up 5.6%) including 571.1 billion from railroads (up 2.1%), 505.3 billion from water transport (up 10.7%), 76.4 billion from roads (up 2.6%), 49.1 billion from pipelines (up 3.2%), and 0.1406 billion from air freight (up 13.9%). Some of these figures are evidently on a different basis from those of previous years (cf. Table 1.2). Passenger transport totalled 228.1 billion person-km (up 15.8%) of which rail accounted for 138.3 bil- lion (up 13.7%), waterways 12.9 billion (up 13.2%), roads 72.9 billion (up 20.9%), and air 4.0 billion (up 14.3%). Cargo handled by major sea ports was 217.31 million tons (up 2.2%). The implied numbers for 1979, together with available data on water transport volumes (Table 5.1), imply that with oceanic shipping excluded, railways carried 68.1% of the freight volume, coastal shipping 10.3%, roads 9.1%, inland waterways 6.6% and pipelines 5.8%.  C46400/J78983/D1018/22 -9- Table 1.2: CHINA - GROWTH OF FREIGHT AND PASSENGER TRAFFIC Ton-km (billion) Passenger-km (billion) Rail Road Water Total Rail Road/a Water Air Total 1952 60.2 1.4 14.6 76.2 20.1 2.3 2.5 .02 26.9 1957 134.6 4.8 41.6 181.0 36.1 8.8 4.6 .08 49.6 1977 455.7 25.1 276.2 757.0 102.0 44.8 9.8 1.8 158.4 1978 533.3 27.4 377.9 938.6 109.1 52.1 10.1 2.8 174.1 1979 558.8 26.8 456.4 1,042.0 121.4 60.3 11.4 3.5 196.6 /a The figures relate to the output of Transport Departments only, i.e. they exclude both the work done by ministry, enterprise, and commune-owned vehicles and vessels as well as the substantial short-haul road traffic by multipurpose tractors. Source: State Statistical Bureau, "Main indicators: Development of the National Economy of the People's Republic of China," Beijing, May 1980. Transport and Economic Development 1.15 The transport sector's contribution to economic development can be measured in part by comparing transport growth rates with those of the output of the total economy and its main sectors. The figures in Table 1.3 suggest that in China, as in other developing countries at the lower end of the per capita income scale, freight transport output since 1957 has been increasing faster than total output - about 6.5% p.a. (footnote /b, Table 1.3) as compared with about 5% p.a., or an elasticity ratio of around 1.3, i.e., a 10% rise in national income is associated with a 13% increase in freight traffic. The growth in traffic reflects the marked structural emphasis on heavy industry which required bulk movements of such goods as coal, cement, steel and construction materials over distances averaging around 435 km in 1979, nearly double the average (about 225 km) in 1957. The relationship of freight growth to GNP growth is less than that experienced by other countries in similar phases of development and reflects in part the development policy involving limited interregional trade in foodstuffs and consumer goods. In India, freight traffic grew twice as fast as national income for the first two decades after Independence, though the growth rate has tapered off in the last decade, with freight traffic now rising at about the same rate as national income. The rate of increase in passenger traffic in China (6.5% p.a.) has been marginally above that of national'income. On the railways - the dominant carrier and for which transport statistics are the most reliable - the average annual rate of growth in passenger traffic since 1957 has been around 5.5% p.a. By contrast, in India rail and road passenger traffic grew at an average rate of 5.5% p.a. during the period 1950-70 and at over 8.0% p.a. in the 1970s. The following figures also suggest a rapid growth in passenger traffic by road, but the exclusions in coverage (para. 1.13 and footnote to Table 1.2) make this series problematical.  C46400/J79057/D1018/24 - 10 - Table 1.3: CHINA - ECONOMIC AND TRAFFIC INDICATORS (1957-79) % p.a. % p.a. increase/a increase/a 1957 1977 1978 1979 1957-79 1977-79 National Income 100 267 299 320 5.5 10.0 Agriculture Gross output value 100 169 185 200 3.5 9.0 Industry Gross output value 100 616 698 775 9.5 12.0 Light industry 100 403 446 499 7.5 11.0 Heavy industry 100 553 639 688 9.0 11.5 Freight transport (ton-km) 100 438 541 601 8.5 /b 17.5 Rail 100 339 397 416 6.5 10.5 Road /c 100 524 572 560 8.0 3.5 Water 100 666 911 1,100 11.5 29.0 Passenger-km 100 317 349 394 6.5 11.0 Rail 100 282 302 336 5.5 9.5 Road /c 100 508 591 703 9.0 17.5 Water 100 211 217 246 4.0 8.0 Port traffic 100 421 532 570 8.0 16.5 Population 100 146 149 151 1.9 1.7 /a Rounded to the nearest 0.5%, except for population. /b We believe this figure slightly overstates the internal freight movement because the water transport figure includes ocean shipping by some Chinese-owned vessels. Based on partial information on coastal and ocean shipping we estimate that total freight transport (ton-km) increased at about 6.5% p.a. between 1957 and 1979. This figure is used in para. 1.15. /c The mission assumes the figures relate to the output of Transport Departments only, i.e. they exclude both the work done by enterprise and commune-owned trucks or buses and the substantial short-haul traffic on the roads done by multipurpose tractors. Source: Derived from State Statistical Bureau, "Main Indicators", Beijing, 1980.  C46400/J79057/D1018/25 - 11 - Table 1.4: CHINA - MODAL DISTRIBUTION OF TRAFFIC (%) 1952 1957 1977 1978 1979 1. Freight-km Rail 79.0 74.4 57.3 54.4 51.3 Road /a 1.8 2.7 3.2 2.8 2.5 Water 19.2 23.0 34.7 38.5 41.9 Pipeline - - 4.9 4.3 4.4 Total 100.0 100.0 100.0 100.0 100.0 2. Passenger-km Rail 81.0 72.8 64.4 62.7 61.7 Road /a 9.1 17.7 28.3 29.9 30.7 Water 9.9 9.4 6.2 5.8 5.8 Air - - 1.2 1.6 1.8 Total 100.0 100.0 100.0 100.0 100.0 /a By transport departments only - therefore understates the traffic volume moving on the roads in that it omits the output of vehicles owned by enterprises, ministries and conmmunes as well as by traditional transport means. New numbers for 1980 (footnote, para. 1.13) imply a share of 6.4% for road transport in 1980 and 6.5% in 1979. Source: From State Statistical Bureau, "Main Indicators", Beijing, 1980. Performance 1.16 There are, no doubt, many efficiency indicator series available to the Chinese authorities which give them a picture of the performance of the transport sector. These have not been published, however. Scattered evidence, however, suggests that on the railways, for example, freight traffic increased from under an average of 2.0 million ton-km per route-km in the early 1950s to over 6.0 million ton-km in 1960, with a plateau through the 1960s and then a rise to over 10.0 million ton-km recently (Table 1.5). As early as 1959 the heavily travelled line between Shenyang and Wuhan was reported to have traffic densities in different sections of 25-35 million ton-km per route-km.  C46400/J78983/D1018/26 - 12 - Table 1.5: DENSITY OF TRAFFIC PER ROUTE-KM (Rough comparison) Passenger-km per Net ton-km per route-km p.a. route-km p.a. China India/a China India/a - ( 000) ----