Heavily indebted China Railway Corp expected to raise freight rates

China Railway Corporation (CRC) is expected to raise freight rates early this year to relieve its massive debt burden and speed up market-oriented reform in the industry, which it monopolises.

However, such a move may further reduce the competitiveness of rail against road freight, which has rapidly overtaken it in market share.

The rail freight rate in China may rise from 0.12 yuan (15.2 HK cents) per tonne per kilometre to an average of 0.15 yuan, which the railway operator said would be “more reasonable”.

“Freight services are a major source of income for the railway operator. However, the freight rate has long been under the market value,” said Li Hongchang, a railway expert and economics professor at Beijing Jiaotong University.

CRC was spun off from the former ministry of railways in March last year, taking over the entire assets and debts of the dissolved railway department. A reform in the railway freight sector has since been at the top of its agenda.

Statistics from the National Audit Office show that the new national railway operator was bogged down in debt of 2.9 trillion yuan in June last year, while its total assets were valued at 4.66 trillion yuan.