Ticket to ride the MOR freight train
Until recently, the Ministry of Railways (MOR) had almost no dedicated logistics services. This high-margin niche in the market was dominated by private companies paying to get goods or parcels on trains, while the MOR focused on low-margin cargo transport.
Hungry for a slice of the action, the MOR has created three logistics subsidiaries to grab back business from the private operators: China Railway Express (CRE), which carries parcels and registered mail door-to-door; China Railway Container Transport (CRCT), which transports standard shipping containers; and China Railway Special Cargo (CRSC), a smaller company that handles refrigerated goods and other large or awkward cargo.
'Getting your product onto freight trains depends on the quality of your relationship with MOR,' said Deutsche Bank transport analyst Lillian Li. 'CRCT and CRE, as offshoots of MOR, clearly have this. It shows that MOR intends to squeeze out the private players.'
Under MOR's plan to allow private capital, including foreign investments, to fund railway construction projects, the three logistics carriers are also prime targets for stock market listings.
CRCT already has a listed subsidiary, Tielong Container, which is building 18 new logistics hubs with a Hong Kong partner, New World Development, the only foreign company currently investing in railway infrastructure.