How Beijing is deepening reforms in the Railways

Excerpt from the speech of Wang Xiankui, Senior Advisor, Ministry of Railways, China:

With the transfer of the planned state economic system to a socialist market economy, China’s original railways system was found incompatible with the development of the market economy. The most outstanding problems were: (1) the functions of the government administration and those of enterprise management were not separated; (2) the ownership responsibility was not well defined; (3) there were too many management layers and overlapping legal entities; (4) the transportation price system was not rational and the social security system was incomplete. All these problems have become major obstacles restricting railway development and operation. The objective of reform for state-owned enterprises in our country is to establish a modern enterprise system, ie., new management systems of “clear distinction of production and ownership, clear demarcation of ownership and responsibility, separation between governmental function and enterprise function, scientific management.” China’s railways have speeded up reform according to these objectives.

Since 1992, Chinese Railways has been aiming to establish a modern enterprise system. Eleven pilot units have been selected throughout the country to start the modern enterprise system experiment. The Dalian Railway Sub-bureau, one of the 100 state pilot enterprises, has been reorganised and turned into the Dalian Railway Limited Liability Company. The Guangzhou-Shenzhen Railway Corporation has been reorganised the Guanzhou-Shenzhen Limited Share-holding Company and its stocks have been successfully listed on the international market, collecting a total of 4.5 billion Renminbi Yuan. The Guangzhou Railway Bureau has been changed into a holding company, and has been included in the state’s 120 large pilot enterprise groups. The China Railway Rolling Stock Industrial Corporation has been reorganised into a holding company; and the China Civil Engineering Construction Company, a group company.

Efforts have been made to reduce management layers, and we have disbanded some railway sub-bureaus. The Nanchang, Hobhot, Liuzhou, and Kunming railway bureaus have made experiments in directly administering stations and sections. Meanwhile, to optimise the allocation of resources, the grassroots stations and sections have been readjusted: 1,230 small railway stations with relatively small business volumes have been closed down; some passenger and freight stations and sections have been merged; and 138 locomotive and car depots have been disbanded.

Efforts have been made to improve the transportation income and the management of costs. This is being done to: (a) conduct reforms in labour, personnel, wage distribution, (b) relax control over the prices of the railway industrial products; and (c) to adopt the bidding system for the procurement of locomotives, passenger and freight cars, and the engineering projects. This will speed up the cultivation of the internal railway market and encourage orderly competition among enterprises.

In accordance with the principle of “overall planning, combining departments with regions, taking responsibility level by level, and co-operative construction,” Chinese Railways is promoting the development of the jointly invested railways....

Since 1998, China’s railways have begun to deepen the reforms. In 1998, the Ministry of Railways put forward an overall reform and development plan of “one objective, two major tasks and three footholds.” One objective: Through large-scale development and construction lasting five years, railway transportation and services will reach a new stage, when they will basically meet social needs and the needs of national economic development. Two tasks: Speeding up the construction of railways so as to live up to our responsibility for promoting national economic development, and making up deficits and increasing surpluses to make contribution to help large and medium-sized enterprises, including those in communications, to extricate themselves from difficult positions. Three footholds: gaining footholds in deepening reform, in strengthening management, and in progress in science and technology.

To achieve these objectives, the Ministry of Railways enforced structural reform in three aspects in 1998. First, simplifying structures and reducing the number of employees. The organs at bureau level were reduced from 23 to 16, a decrease of 30 per cent, organs at departmental level, from 133 to 74, a decrease of 44 per cent, employees from 809 to 400, a decrease of 51 per cent. The transport management department has been suitably adjusted, that is to say, the former five departments—transportation, locomotive, rolling stock, permanent way, and the signal and communication bureau—were combined as the transportation centre (the transportation bureau)....

Second, promoting separation of administration from management, strengthening the functions of macro-control management and supervision, weakening the functions of social and micro-control management, and establishing the main market status of the Railways Bureau, the engineering Bureau and the factories. Third, smoothening the responsibilities of different departments and increasing operating efficiency. According to the principle of “letting each department do one thing”, the responsibilities and power limits of each department have been ascertained, the functions among departments have been re-adjusted and those with the same or similar functions have been combined....

Today, increase in efficiency is being achieved through personnel reduction. The goal as a whole is to reduce the number of railway workers and transportation enterprise employees to 300,000 by the end of 2000....

The development of China’s railways mainly depends on the railways sector itself, but it is also necessary to bring in investment and technology to learn from foreign experience in railway reform and management. We will be expanding reform and opening up. We will actively bring in foreign investment and key technologies, promote production in the form of joint ventures, enlarge railways foreign trade, develop international transportation market, make efforts to establish a new set-up for reforming and opening up..., and strive to realise the development goal of China’s railways into the new century in a more effective way.

Source: The Rakesh Mohan Committee Report on Railways