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) ----…(000)… 1950 590 1,765 1,750 1,502 1960 n.a. 2,027 6,909 2,764 1970 n.a. 2,876 6,780 3,611 1977 2,060 3,674 9,206 4,358 1978 2,165 4,377 10,580 4,547 1979 2,357 10,850 /a Relates to broad gauge system only which though only 51% of total route length accounts for 86% of freight ton-km and 76% of passenger-km. Source: Report of the National Transport Policy Committee, New Delhi, May 1980, P. 139. Future 1.17 No forecasts of future traffic growth were available. A 5% p.a. increase in national freight traffic growth during the 1980s would mean a total tonnage of around 4.0 billion to be moved in 1990. If it is assumed that two-fifths of the increment would go by rail, the increase would be equivalent to another 60 million tons or so of traffic per year. For passenger traffic, railway authorities forecast a 6% annual growth to 1985. This would add 300 million passengers a year to the system and require substantial investments in equipment as well as in lines and stations. Experience in many other countries show that future rail passenger traffic is often underestimated, even where road transport plays a larger role than in China. In China, the level of passenger traffic has been so far determined more by the capacity provided by the railways than by the actual travel demand; and priority has been given to freight traffic. The investment required reinforces attention to the points made in the next chapter about the role of the different modes (modal split), short-haul freight and passenger traffic, transport pricing, planning, training and energy issues. C46400/J78983/D1018/27 - 13 - 2. PAST DEVELOPMENT STRATEGY AND CURRENT ISSUES A. Transport Development Strategy and the Modes 2.01 The pattern of transport development and the roles played by the different transport modes in China are the outcome of firm, politically determined, basic policies relating to national self-sufficiency, dispersed development, primacy of heavy industry, public ownership and decentralized decision making, as well as defense strategy considerations. Different national policies would have meant different political and planning decisions about the size, modal distribution and location of transport sector invest- ments, and would have produced different organizational, technological and operational responses in the sector. A number of other factors, however, also condition some of the problems facing the transport sector and its ability to respond to the desired policy objectives. This section looks briefly at the effects of these basic national policies and the other factors. It concludes that the shift in national economic policies now being attempted has important implications for investment allocations within the sector as well as for the agencies engaged in transport administration and operations, if they are to contribute to achievement of the new economic policies. Self-Sufficiency, Dispersed Development and Industry Primacy 2.02 For the first 20 years or so after 1949, China's trading ties with the West were largely cut. Initially, China oriented its trade to the USSR and Eastern Europe, but seaborne trade between them and China was small. Thus, ocean shipping and port development were given low priority. Conversely, up to 1960 rail links between the Soviet and Chinese railway systems were strengthened by line improvements and by the transfer from the USSR of over 1,000 steam locomotives that were made redundant as it dieselized its system. 2.03 The main tasks facing Chinese policy makers in the early 1950s, therefore, related not so much to foreign trade as to reconstructing and rehabilitating the railways; integrating the country politically and administratively; and moving the center of gravity of industrial location away from the coastal areas for economic and strategic reasons, one consequence of which was to limit the significance of coastal shipping. Accordingly, the first and second Five-Year Plan (FYP) periods saw some new rail transport lines being constructed but much attention given to improving and expanding the other modes. Investment in transport and communications is reported to have accounted for 16.4% of all national investments in the first FYP period. This is fairly typical of experience in other developing countries, but at the lower end of the 12-30% range. The ratio of funds C46400/J78983/D1018/28 - 14 - invested in new rail line construction to old line improvement was only 1.3:1.0 whereas in the subsequent periods covered by the third and fourth FYPs a major shift in investment took place towards new rail line construction, with the new to old ratio' rising to 6.0:1.0 and about 80% of the new construction being located west of a line from Beijing to Guangzhou. 2.04 Many of these new lines aimed at unlocking the potential mineral (including coal) and other national resource sites. Initially, it seems, heavy industry was to move closer to such fuel and materials, thereby reducing transportation costs. Some observers have noted that because of wartime and prewar experience, there were strategic aspects in the initial shift of industry westwards to sheltered regions, but by the late 1950s/early 1960s this strategic emphasis was being reduced and many bulk materials and much fuel began flowing to the older established industrial centers. During and immediately after the Great Leap Forward, some emphasis was given in industrial policy to smaller scale, more scattered producing units for regional income distribution and quasi-autarkic economic reasons. This shift towards a regional self-sufficient "cellular economy," as it has been called, reduced transportation demands for agricultural, light industry, and consumer goods transport, but generated both inter- and intra-regional traffic in bulk inputs needed by heavy industry, and major construction projects required some rail and road construction. 2.05 Chinese development policy emphasized the rapid development of heavy industry. The transport effect meant giving priority to industrial freight rather than to passenger traffic, except for transporting workers to and from work and to assist in migration to and the administration of the peripheral areas of China. Restrictions of population movements and limitations on urban population size limited the migration from rural areas so characteristic of many other countries and also meant it was possible to relegate passenger transport to a secondary emphasis. 2.06 After 1961, policy shifted and increased attention was given to agriculture. Thus rural transport fared better and many roads were built by local initiative to low standards. Such local efforts at road building, however, are hampered by many physical problems. On the North China Plain, for example, drainage is generally poor, floods damage roads and wash out bridges; in the loess territory erosion is a major problem; on the Huang He plain, local road building materials are scarce; in the extreme north, con- struction and maintenance is difficult because of the problems created by alternating freezing and thawing of the earth which breaks up roads; and in the narrow valleys of South China, rice paddy land is at a premium, so little land can be spared for roads. 2.07 With the rapid development of external trade in the 1970s, ocean shipping and ports were given higher priority, and coastal trade also grew rapidly; one manifestation of this policy was the rapid acquisition of ocean- going vessels. However, until recently, the continued emphasis in the C46400/J78983/D1018/29 - 15 - economy as a whole was on heavy industry. This has meant that rail freight traffic is dominated by a small group of 6 commodities centered on mineral ores, construction and industrial raw materials, and coal and petroleum which, in total, account for three quarters of the traffic and move in full and multiple carloads. The output of light industry, agricultural processed products, and consumer goods are not a significant share of rail traffic, other than in some short-haul traffic. They do not create the type of loading/unloading and equipment problems faced by railways in other countries where they may be an important share of rail traffic. The modest growth until recently of light industry and agriculture in China and the recent timing of China's development thrust have meant that the railway networks, unlike many of those in other countries, are not burdened with numerous short distance, light density traffic lines similar to those built elsewhere in the late 19th/early 20th centuries. The focus on heavy industry has worked in favor of rail transport technologically and against road transport, as can be seen in the railways' higher research efforts and the outmoded standards of truck manufacture as well as low road design standards. Among the consequences of the rail emphasis is that China, somewhat like India, has not had to face road-vs-rail issues that plague other countries such as allegations of 'unfair competition,' low road user-charges, overloading in long-haul road transport, and wasteful subsidies to the railways. 2.08 Chinese transport experience also reflects basic decisions that had to be taken in the 1950s when the technological options that are now more generally available were not at hand. That is, in the 1950s steam locomotives were a quick, cheap and easy way of getting the economy moving and over 1,000 were made available by the USSR. Trucking was not a significant option since, given the USSR's limited trucking base, this would have meant importing fuel and vehicles from the market economies, which was politically impossible. It was clear to Chinese decision makers that for the long-haul movement of large volumes of minerals, fuels (particularly coal) and other industrial raw materials, the railways were the only viable alternative, supplemented by water transport on a limited number of routes. This emphasis on the railway, which has made a tremendous contribution to Chinese economic development, may, however, have introduced rigidities into transport thinking and, as a result, the potential of road and water transport may be inadequately assessed in decision making and project analysis. 2.09 The great rivers flow west and east and fail to provide direct links between north and south China. Coastal shipping could provide such a link, but, for a variety of reasons already noted, was not given until very recently a priority commensurate with its potential. Now, however, in a changed world political environment, it would appear to offer significant potential for expansion and energy savings. Many parts of south and central China have abundant water for rivers and canals which can be used for transport. Lack of usable water in the central deserts and plateaus, however, impeded the spread of steam locomotives, but now diesel and electric power C46400/J78983/D1018/29 - 15 - economy as a whole was on heavy industry. This has meant that rail freight traffic is dominated by a small group of 6 commodities centered on mineral ores, construction and industrial raw materials, and coal and petroleum which, in total, account for three quarters of the traffic and move in full and multiple carloads. The output of light industry, agricultural processed products, and consumer goods are not a significant share of rail traffic, other than in some short-haul traffic. They do not create the type of loading/unloading and equipment problems faced by railways in other countries where they may be an important share of rail traffic. The modest growth until recently of light industry and agriculture in China and the recent timing of China's development thrust have meant that the railway networks, unlike many of those in other countries, are not burdened with numerous short distance, light density traffic lines similar to those built elsewhere in the late 19th/early 20th centuries. The focus on heavy industry has worked in favor of rail transport technologically and against road transport, as can be seen in the railways' higher research efforts and the outmoded standards of truck manufacture as well as low road design standards. Among the consequences of the rail emphasis is that China, somewhat like India, has not had to face road-vs-rail issues that plague other countries such as allegations of 'unfair competition,' low road user-charges, overloading in long-haul road transport, and wasteful subsidies to the railways. 2.08 Chinese transport experience also reflects basic decisions that had to be taken in the 1950s when the technological options that are now more generally available were not at hand. That is, in the 1950s steam locomotives were a quick, cheap and easy way of getting the economy moving and over 1,000 were made available by the USSR. Trucking was not a significant option since, given the USSR's limited trucking base, this would have meant importing fuel and vehicles from the market economies, which was politically impossible. It was clear to Chinese decision makers that for the long-haul movement of large volumes of minerals, fuels (particularly coal) and other industrial raw materials, the railways were the only viable alternative, supplemented by water transport on a limited number of routes. This emphasis on the railway, which has made a tremendous contribution to Chinese economic development, may, however, have introduced rigidities into transport thinking and, as a result, the potential of road and water transport may be inadequately assessed in decision making and project analysis. 2.09 The great rivers flow west and east and fail to provide direct links between north and south China. Coastal shipping could provide such a link, but, for a variety of reasons already noted, was not given until very recently a priority commensurate with its potential. Now, however, in a changed world political environment, it would appear to offer significant potential for expansion and energy savings. Many parts of south and central China have abundant water for rivers and canals which can be used for transport. Lack of usable water in the central deserts and plateaus, however, impeded the spread of steam locomotives, but now diesel and electric power C46400/J78983/D1018/31 - 17 - (f) more railroad cars, some major marshalling yards, and more diesel and electric locomotives will be required, but decisions need to be preceded by careful economic evaluation and consideration of alternatives; (g) the potential for further expanding water transport justifies carefully phased improvements in ports and inland waterways, along the lines recently begun; and (h) in both passenger and freight short-haul traffic, road transport can play a greater role, as discussed elsewhere in this chapter, if the motor fuel problems can be resolved. B. The Transport Policy and Planning Framework 2.11 In a broad sense, transport policy and planning involves (a) deter- mining the volume and composition of future traffic; (b) formulating guide- lines and measures which will result in traffic being distributed among the various modes in a way that minimizes total social costs; (c) establishing rules that will guide transport agencies proposing investment decisions; and (d) developing supervisory and feedback mechanisms to ensure that plans, programs and projects are carried out in a manner consistent with policy objectives. Many agencies are apparently involved in the transport policy and planning process. At the national level, transport is administered by the Ministry of Railways (MOR); the Ministry of Communications (MOC) covering roads, main ports, coastal and ocean shipping and some inland water transport; the Ministry of Petroleum (MOP) for pipelines; and the Civil Aviation Adminis- tration of China (CAAC), a special agency of the State Council. Decision making in the railways, pipelines and aviation is highly centralized, but in the roads and water transport subsectors the role of provincial, county and commune governments and enterprises is very important. Transport decisions, therefore, have to be coordinated 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. 2.12 Horizontal coordination seems to take the form mainly through the approval and scheduling of investment 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 participation in the project design and implementation scheduling plans for major projects. In principle, the SPC perspective is longer and medium-term while the SEC deals with annual plans and budgets needed to carry out the SPC's plans, within the current year s resource constraints. In practice, there seems to be some blurring of these roles. 2.13 The SPC and SEC each have Transportation Bureaus made up of four divisions - railways, communications (i.e. road and water transport), tele- communications and general administration. The staff of each bureau is C46400/J79057/D1018/32 - 18 - reported to consist of engineers, financial analysts, economists and admin- istrators. Given, however, both the limited staff numbers - 25 in SPC (22 positions filled) and 30 in SEC - and the wide area of their responsibilities, the amount and depth of analytical and policy work conducted by these bureaus, at best, can be limited and somewhat superficial. They rely largely on work done by the operating ministries and agencies (MOC, MOR, MOP; CAAC) because they are not equipped to undertake independent investigations. The recent re-establishment of the Institute of Comprehensive Transportation within the SEC, however, is a significant step towards getting an overall picture of transport developments and analyzing problems from a sectoral rather than a limited modal viewpoint. This venture should be encouraged by giving it the staff and other resources needed to undertake, among other things, the following functions: (a) to survey from time to time actual traffic patterns and real transport costs in the different modes; (b) to analyze the factors influencing trends in transport demand; (c) to examine the transport price structure for freight and passenger traffic in each of the modes in relation to their costs; (d) to study the effects of fiscal policies and subsidies at the central and provincial government levels to see what, if any, distortions in resource allocation are taking place and what objectives are being achieved; (e) to monitor the functioning of the transport system in order to identify promptly impending problems or major imbalances (contradictions) between demand and supply; (f) to suggest appropriate policy principles and prescriptions for the sector to help it achieve national objectives; and (g) to establish cost-benefit appraisal techniques for use by the operating agencies and ministries and in cooperation with their planning units. 2.14 Information on 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. Investment "trade-offs" resulting from changing price and other policies to influence transport demand volumes and shifts of traffic among the modes do not appear to be part of the SPC/SEC planning process, not least since it is unclear whether there is a coordinated relationship between the SPC/SEC and the State Price Bureau and between centrally and provincially determined transport prices. 2.15 Whatever broad planning and coordination is done at the central level for the transport sector appears to be the outcome of meetings set up by the SPC/SEC, at which the responsible ministry, other interested minis- tries and affected large enterprises attend. If foreign trade and equipment procurement from abroad is important in a project proposal, the Foreign Trade Ministry participates. Decisions seem to be taken by consensus rather than on the basis of established rules relating to minimum acceptable rates of return on investment or uniform methodological criteria of economic evalua- tion, technical standards and project timing. Whether there is rigorous analysis and cross-examination of project proposals to see what the invest- ment would do for the finances and operating efficiency of the requesting agencies is not known. The mission is unaware of any formal or informal national transport plan. The ministries have lists of desired projects, but how far these had been prepared and evaluated and the objectives they are to serve is unclear. No typical pre-investment studies were made available. C46400/J79057/D1018/33 - 19 - 2.16 For equipment planning purposes it is possible that at the broad aggregate level planning coefficients are used to arrive at the capacity required to meet transport demand, after decisions have been taken about the national production levels for key products, e.g. it is reported that on the railway: ... every 100 million yuan of overall agricultural and industrial output produces approximately 200,000 tons of traffic ... every 100 million tons of coal produces about 70 million tons of traffic; every 100 million kilowatt hours of electricity produces 50,000 tons of traffic; every 10,000 tons of crude oil produces 5,000-6,000 tons of traffic; and every 10 million tons of steel output generated approximately 60 million tons of traffic ... and each 100 million ton increase in transport volume on the railway required 1,000 locomotives and 20,000 cars."/1 2.17 A need for improved coordination at the operating level seems to exist also. There is what appears to be unnecessary transshipment of cargo in the road and water modes and unnecessarily circuitous journeys. In the latter case, for example, ocean, coastal and inland water transport movements are undertaken by a variety of administratively separate units (including production enterprises), each concerned with meeting planned physical production targets rather than minimizing the total distribution costs of traffic flows. As a result there has been a tendency to over-invest in some types of equipment and to get low utilization from it so that it is available on demand. 2.18 While substantial progress has been achieved in the transport sector, many Chinese officials feel that much remains to be done as indicated in the following quotation: "In order to raise investment results, we must start at 'the head of the dragon', strengthening research, determining the importance and urgency of transport needs, weighing invest- ment results, fixing scientific transport industry develop- ment plans and yearly investment plans; investment projects projects must be correctly determined, and the capital con- struction front shortened; capital construction management methods and the management system must be reorganized and improved, and the contract system restored; the banks must be utilized to strengthen investment management and super- vision; economic effectiveness indices must be used to check capital construction work. In short, the results of invest- ment in communications and transport must be raised, communi- cations construction must be quickly and economically carried carried out, and the attitude of competing for investments and projects without regard for economic results must be overcome."/2 /1 "Some Questions Regarding China's Development of Communications and Transport," Yang Hongnian and Wang Derong, Comprehensive Transport Research Institute, Beijing, Jan. 1980. [Unpublished, in Chinese] 12 Ibid. C46400/J79057/D1018/34 - 20 - 2.19 There can be no dissent from such sentiments, but each of the points raised needs to be examined in China to assess the causes, costs and remedies available. C. Transport Pricing 2.20 As in other sectors of China, prices in the transport sector 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. Price stability has administrative convenience for both planners and the public, but with the passage of time transport tariffs get increasingly out of line with the operating costs they are supposed to reflect, including the real cost of capital being made available to transport enterprises by the government. The social costs of environmental damage by transport (e.g. pollution of ports and rivers) are not communicated to transport planners and managers by either price or nonprice signals. 2.21 The growing concern of planners and decision makers in China about the need for pricing rationality and flexibility is being felt in the trans- port sector. For example, at a "National Academic Forum on Pricing Policy for Truck Transport and Short-Haul Rail Transport" held in October 1980,/1 it was unanimously agreed that: (a) in truck transport the "one price fits all" policy (i.e. average cost method) ignores differences in "road conditions, types of goods, distances, difficulties in loading and unloading; it flies in the face of the law of value and does not foster transport industry management or the flow of goods;" (b) short-haul rail transport prices are below costs and the railroads lose Y 60 million a year on short-haul transport of under 50 km; /1 Represented at the forum were: the Comprehensive Transport Research Institute of the State Economic Commission, the State Pricing Bureau, the Finance and Trade Economic Research Institute of the Chinese Academy of Social Sciences, Chinese People's University, the Planning Office of the Coal Department, the Research Planning Offices of the Communications and Railway Departments of the Sichuan Economic Committee, 27 provinces, municipalities, autonomous regions (in the form of their communications departments or offices), and the railroad offices of Jinan, Shenyang, Chengdu and Shanghai. Seventeen papers were presented and discussed at the forum. Quotations are from the summary minutes of the meeting (translated). C46400/J79057/D1018/35 - 21 - (c) the price ratios between road and rail distort the division of traffic between the modes (and favor rail); (d) preferential truck transport prices aimed at supporting agriculture and special rail prices for agricultural machinery are below costs and because, in practice, "farmers are seldom benefitted by preferential prices, these low profit/high-loss prices should be quickly eliminated;" and (e) before truck transport prices are set in a reform program for 1982 transport prices, "a floating price system may be used." 2.22 The mission subscribes to these conclusions and the perceived need for more rational transport pricing. There is significant regional, and possibly commodity, cross-subsidization within the railway. Modal distortions take place, e.g. short-haul traffic that moves by rail which could move more economically by road or water transport. In the ports, greater price incentives are needed to clear both ships and cargo quickly and thus reduce congestion. There is some evidence that high trucking prices charged by the transport corporations for very short haul traffic have the effect of encouraging traditional transport which, paradoxically, adds to traffic congestion and causes higher social costs for modern transport. Some of the transport pricing practices may have regional income distribution objectives; it is questionable, however, whether they are the most socially effective way of achieving the objective. 2.23 Greater market signalling and managerial incentive roles for transport prices such as being advocated within China will also necessitate better understanding of transport costs for different modes, routes, commodities, seasons, terrain and so on. Transport agencies in China could apparently benefit substantially from the analytical basis of cost-finding procedures and techniques which have been developed elsewhere in recent years. The mission believes that work should begin soon on a study of railway costing. A joint effort by Chinese experts and those from, say, a couple of foreign railways that have recently reformed their costing procedures could be a particularly valuable way of transmitting knowledge of modern analytical techniques of financial and economic costing. D. Short-Haul Freight Transport 2.24 The increase in traffic in recent years put such pressure on the China railway system that capacity was severely strained on some major trunk lines, particularly those in and around industrial centers or rail hubs. According to one Chinese source, the system-wide average for freight carried by rail less than 100 km is about 23-30% of the total tonnage carried and, of this, 13-19% is moved 50 km or less, and 5-10% moves 20 km or less. In C46400/J79057/D1018/36 - 22 - large city hubs the proportions are even higher. In 1979, for example, 21% of the freight carried by the Beijing Railway Administration moved 50 km or less and 34% less than 100 km. The large amounts of short-haul freight accom- panied by a widespread use of industrial sidings (specialized rail lines) as part of the industrial development process, have led to increased numbers of partially loaded train movements; decreases in the distance between sta- tions; increases in the number of marshalling and freight yards; declines in daily car output; and increases in transport costs (including the social costs of congestion to road traffic caused by limited numbers of road-over-rail bridges in urban areas). 2.25 The distance below which road transport is economically superior to rail transport is not a single figure of worldwide application. It will depend, among other things, on the commodities and volumes to be transported; on the size and type of vehicles and the price and type of fuel they use; on road conditions; on the extent of trade and road circuity between terminal points; on the amount of cargo transshipments. Transport costs by rail may prove to be cheaper per distance unit, but customers use road transport because of its lower cargo loss ratios, the reduced packaging costs involved, and the time savings from 'door-to-door' delivery, instant availability of transport and quicker transit times. For example, it has been reported that rail transport from Beijing's eastern suburbs to Tianjin's new harbor takes about 30 hours (including pick-up and delivery, marshalling, transport, sta- tion operations) as compared with 5-6 hours by truck. As another example, transporting coal to Beijing East suburban station from Mentougou requires 30 hours by rail, but only 4-5 hours by truck. Generally, there is an overall lack of mechanized loading/unloading for coal which increases materially both transport costs and delivery times. The quicker turnover of goods and capital when road transport is used is economically very significant, particularly if realistic interest rates are charged for working and invest- ment capital - which they are not in China. Rail transport is technically less fuel intensive than road transport, but whether, in practice, it actually is depends upon the circumstances of particular places, load factors and operations which need to be examined on a specific basis rather than through the use of nationwide average coefficients which, themselves, relate only to the line haul component in the total distribution process and exclude the energy involved in building track, vehicles, terminals, etc. and maintaining them. Analysis undertaken in China suggests that up to distances shown below road transport is more advantageous than rail, e.g. up to 50 km, the ton-km cost by a 7 ton truck-trailer is lower than for a full rail car load. C46400/J78983/D1018/37 - 23 - ESTIMATED ECONOMICAL DISTANCE FOR TRUCK TRANSPORT (km) Full car load Partial car loads 4-ton truck - 70 7-ton truck-trailer 50 110 13-ton truck-trailer 70-110 220 While the accuracy of these calculations may need further testing, the metho- dology employed appears acceptable, and, by implication, so is the conclusion that there is a potentially large role for road transport in short-haul traffic. This question should be closely examined, however, with the particular aim of removing from the railway general cargo that moves in less than train loads for under 50 km and less than carload (LCL) lots for under 100 km./l Construction of sidings should also be carefully surveyed and studied to assess their social and environmental impact on the urban environment. As discussed elsewhere in this chapter, the vehicle manufac- turing, road construction and fuel production and distribution implications of the expanding need for short-haul road transport must be faced squarely, particularly in the light of the large rail investment that would otherwise be required. E. Passenger Transport 2.26 Passenger traffic has expanded greatly in China since 1949, reflect- ing increased population, urbanization and personal income. Road, rail and water passenger transport facilities and services have been improved so that, in general, the public transport system has managed to supply China's growing population with its approved travel requirements. Nevertheless, complaints are common about overcrowding, poor services, inconvenient ticketing arrange- ments, lack of suitable waiting facilities, and slow journeys. From press reports there is a "passenger problem" in both rural and urban areas. /1 Reportedly, the 10th Five-Year Plan in the USSR provides for the closing down of any rail transport under 50 km and under 200 km for perishables and livestock. "Rational Allocation of Short-Haul Transport between Rail and Road," Qi Yong, Beijing, 1980, from which much of the above discussion has been drawn. C46400/J89537/D1018/38 - 24 - 2.27 The Chinese people are still relatively immobile - about 200 passenger-km per capita per year by modern transport means as compared with 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. According to Chinese sources, for example, on 25 trunk rail lines there is no room to increase the number of passenger cars and trains without reducing freight transport. Passenger equipment is also in short supply. In 1979, for example, the railway had 15,000 passenger cars but 5,000 of them could not be used with diesel or electric locomotives. This results in overcrowding on the principal long-haul routes which have been mainly dieselized or electrified, as well as on suburban services. In 1979 there were said to be only 35,000 passenger buses, or one for every 30,000 people in China - and no private automobiles. Most of the buses are adaptations of Liberation trucks with low efficiency and high energy consump- tion. Most of the passenger vessels owned by the shipping companies are used on the Chang Jiang, and only a small proportion for coastal traffic. Many are said to be outmoded, in need of maintenance and frequently out of service. In aviation there are about 20 different aircraft types. This adds to maintenance planning and operations difficulties which, in turn, contribute to low equipment utilization rates. Half of the country-s 41 main line rail stations have been built or remodelled since 1949. At both these and others, however, waiting facilities are limited and passengers have to stay outdoors in inclement weather. 2.28 Short-haul passenger services appear to be subsidized; for instance, on average the prices of one-way short distance rail tickets cover only 20% of the costs. This stimulates traffic which, in turn, adds to congestion. The base price for rail tickets under 50 km is 1.75 fen per passenger-km or 70% of that of the price for bus transport. Again, this encourages short distance rail movement. Ticketless traffic on the railway is reported to be about 5% nationwide, but the share is higher in the northwest. Efforts are being made to reduce this by, among other measures, improving the present cumbersome and inefficient ticket sales arrangements. 2.29 Passenger transport facilities need to be improved to support a growth in tourism by both overseas Chinese (1.0 million p.a. approximately) and other visitors (about 200,000 per year). For example, 11 of the 39 main tourist cities and scenic places do not have an airport, so tourists must go by train if they can find space. There are also potentially important tourist areas which are not even served by rail, and road access to them is poor. 2.30 Any approach to alleviating what both the public and government in China see as a growing transport difficulty must recognize that (a) the travel needs of the country's 800 million peasant population are primarily short distance and mainly by road; (b) in the urban areas most private and journey to work trips will be short distance and mainly by bus and bicycle, though there is some significant suburban rail traffic in a few locations; (c) for overseas tourists and some internal administrative and business journeys C46400/J79057/D1018/39 - 25 - travel over 1,500 km will be made by air for time-saving reasons; (d) for many years to come for most of the Chinese people long distance travel will be by rail, though again there may be selected routes on which water transport may be important. However, as discussed elsewhere in this report, long-haul and short-haul rail services will have to be operated in completely different ways to lower costs and increase efficiency; and (e) any modest percentage increase in passenger traffic as a result of increasing incomes and population will generate very large pressures on the transport system in terms of absolute numbers of people wanting to travel. For example, a continuation of the over 6% p.a. long-term passenger growth rate implies nearly doubling by the end of the 1980s. Such a growth rate is entirely consistent with experience else- where. 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 demand. 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 also. F. Transport and Energy 2.31 Although China, unlike many developing countries, is not yet a net energy importer and, thus, is not under immediate balance of payment pressures because of world oil price increases, the role of the transport sector in the energy scene of China needs examination for many reasons. First, there are opportunities to encourage a more efficient use of energy consumption in the sector through appropriate pricing and conservation measures, although their short-run effects on total energy consumption are not likely to be large because the sector accounts for only about 5% of the total commercial energy consumption. (This share is about 16% but growing rapidly, however, in petroleum and its products, which must now be carefully economized because of stationary or declining output.) Secondly, the differences between transport modes in types of energy used and in relative energy intensiveness (i.e. the energy input needed to produce a ton-km or passenger-km) have important implications for major policy decisions relating to motive power and, particularly, the rates of dieselization and electrification on the railway and the extent of dieselization in the road transport industry. Decisions about these, in turn, have important implications for vehicle equipment manufacturing and other activities, and are likely to become of increasing significance in the energy scene over the longer run. Thirdly, since very large volumes of coal (and lesser amounts of coke and petroleum) are handled by the railways, ports and coastal shipping, the efficiency and transport capacity available in these activities are relevant to major C46400/J79057/D1018/40 - 26 - decisions that have to be taken within the energy sector itself (e.g. mine-mouth versus load center electricity generation; coal washing before transport; the size and timing of contracts for coal exports). 2.32 The transport sector consumed only about 5% of the total energy available in 1979, and, as shown in the following table, this was divided roughly as rail 40%; roads 47%; and water 13%. Table 2.1: ESTIMATED ENERGY CONSUMPTION IN THE TRANSPORT SECTOR (1979) Million tons % Product and user group of coal equiv. share Coal - railways 11.9 37 Oil 20.6 63 of which - roads 15.2 47 - water 4.1 13 - railways 1.0 3 - other 0.3 1 Total 32.5 100 Source: Ministries of Energy, Railways and Communications. The small share of transport in China's total energy consumption contrasts sharply with experience elsewhere. For example, the share is typically in the 15-25% range, in high and middle income countries and in the 10-20% range in low income countries./l In India, though, the transport sector uses over 33% of that nation's commercial energy and over 50% of its oil supplies./2 In many countries road transport usually accounts for 70-85% of the energy directly consumed by the transport sector, with rail and air transport con- suming about 3-5% and 5-10% respectively. China clearly is different. The role of railways is much more important than in any other large economy; road transport is of lesser significance than elsewhere, but is important in the small oil component of total energy supply; water transport cannot be ignored; /1 Finance and Development, Dec. 1980, Vol. 17, No. 4, p. 13. /2 Report of the National Transport Policy Committee, New Delhi, 1980, p. 27. ,46400/J89795/D1018/41 - 27 - and aviation is relatively insignificant./l The small share of transport in energy consumption in China is also explained, among other reasons, by (i) the generally under-developed state of its road transport sector as compared, for example, with higher income countries or other large area developing countries such as Brazil and India; (ii) the unique situation of no private automobile ownership; (iii) development policies which have given heavy emphasis to maximizing self-sufficiency at the regional/provincial/ local levels and thus minimizing transportation demands; (iv) administrative and physical disincentives to personal travel; and (v) a deliberate restraining of truck and bus production and imports. There may also be statistical underestimation, since part of the oil required by industry and agriculture may be used in fact for transport. 2.33 Unlike in many Bank member countries, the level of gasoline pricing for automobile use is not a major issue in China - the average Chinese price for gasoline is 70% above the international price. Nor, since there are very few diesel trucks, is the question of the relative prices of gasoline and diesel in the development of the trucking and bus industries. The prices for gasoline used by trucks, however, do not encourage fuel economy. At a national Conference on Energy and Transport held in Shanghai during November 1980 the delegates were "unanimous in recognizing that because of poor management, confusion in the transport market, surplus capacity in some areas, frequent empty runs, a low 'full rate-, etc., a great deal of gasoline was wasted." The delegates noted also that the specialized trucking corporations generally got 30-60% better fuel efficiency from their vehicles as compared with public (i.e., Ministry, enterprise and commune 'own account') trucks of the same models by better planning and maintenance. Finally, the delegates stressed (i) that old, fuel-inefficient vehicles should be scrapped;/2 (ii) that improving the technical characteristics of China's roads would help to raise truck transport capacity, lower fuel consumption and permit greater advantage to be taken of truck service qualities; and (iii) since "experience in all regions of China had shown hard-surfaced roads can save one-third on fuel over dirt roads" that road maintenance funds should be increased and greater efficiency be made in their use. Steps such as those mentioned, /1 Whatever fuel savings can be made by better operating procedures, equip- ment utilization and other conservation measures will be useful, parti- cularly since its present fleet of Trident and Boeing 707 aircraft are fuel inefficient as compared with the latest equipment. Correct pricing of aviation fuel could lead to significant decisions about equipment replacement and aircraft operations. /2 Many trucks belonging to the Shanghai Transport Corporation, for example, are over 20 years old. C46400/J89795/Dl018/42 - 28 - together with proper vehicle maintenance, a greater use of tractor-trailer combinations and improved driving skills, will help to conserve fuel in the road transport sector. Similar types of operational savings are also possible in the other transport modes including by a reduction in the large amount of cargo transshipment which takes place more, it seems, for administrative and institutional than economic reasons. The prevalence of transshipment increases journey circuity, requires more investment in cargo handling equipment, and raises cargo damage costs. 2.34 The Chinese authorities recognize that there is an obvious potential for energy savings in the transport sector which must be taken advantage of. It should be noted, however, that the impact on total energy consumption would be modest - industry is the great consumer. Chinese experts estimate that perhaps 40% of the energy now consumed in the transport sector could be saved by technology, policy and energy management changes. The effect of such a 40% savings would mean a reduction of only 2% in total commercial energy consump- tion. While this is obviously desirable, it has to be offset against the major investments and other factors that would be involved in achieving it. It has been estimated, for example, that to replace China's steam locomotives with diesels would require Y 8-9 billion and save 11 million tons of standard coal equivalent. It will take time for significant energy savings to materialize since they depend on a combination of developments such as more fuel efficient gasoline trucks; increased production of diesel trucks; shifts from steam to electric and diesel traction on the railways, and from land to water transport in the internal distribution system, including a greater use of barge trains; and large investments to upgrade petroleum refineries. What can be expected in practice are incremental effects in all of these, leading to small but welcome energy savings. 2.35 Chinese technical experts are working on ways to improve the fuel efficiency of the country's basic truck and bus fleet which is based pre- dominantly on an outmoded pre-World War II design. About 150,000 of these vehicles are still manufactured annually. Their fuel consumption is reported to be 15% higher than for vehicles of similar capacity produced elsewhere, but they do run on low octane gasoline. It has been estimated that 10% reduction in the annual fuel consumption of trucks in China would save 800,000 tons of gasoline, or some $250 million at international prices. A results-oriented, and time-based, research program to achieve this should be supported fully with liberal funding by the government. This should include consideration of alternative fuels such as liquified petroleum gas (LPG) which is not a technical problem but could be a supply constraint in China. 2.36 The potential for a greater role for road transport was discussed in Section D above. Even though this role is primarily in short-haul traffic, larger size, diesel powered, trucks would be necessary. China's production of diesel fuel is adequate at present, but it could not meet a large shift from gasoline to diesel in the short run; a further investment in petroleum cracking facilities would be required. (But it may be needed in any case, to C46400/J79057/D1018/43 - 29 - meet the rising demand for gasoline.) Increasing the proportion of diesel vehicles in the vehicle fleet will require overcoming technical problems in producing diesel fuel injection pumps as well as heavy investments to modify the oil refineries. Thus, since increase in the potential supply of diesel fuel remains limited, the prospects of a major shift to diesel power in road transport is not likely in the short run. Nevertheless, there is a case for some increase in diesel output to supply fuel for large imported trucks (e.g. needed to carry containers) and the railways so that they can increase the size of diesel locomotive fleet. 2.37 China's railway is exceptional among the world's major railways in that 78% of its locomotive fleet consists of steam locomotives, and only some 20% are diesel and 2% electric. Currently, there are about 150,000 railway locomotives in the world, of which about two thirds, or 100,000, are diesel powered. Excluding China, 95% of the railways in 109 countries use diesel locomotives and in at least 50% of the countries diesels are the main loco- motive power./l The only other major railway system where steam traction remains important is India where it accounts for 30% of traffic and consumes 12 million tons of coal - the same consumption as in China, but for a much smaller freight throughput. China still produces about 300 steam locomotives annually to meet replacement and capacity expansion needs, even though Chinese experts fully accept that burning coal in steam locomotives is a low-efficiency and uneconomic form of coal utilization. Technologically, steam locomotives have improved over the past 30 years in China and still further improvements in their energy efficiency are being aimed at, from the present 6-8% to as much as 10%, with the help of pre-sorting of the coal used. Accompanied by better fuel management and operational practices, these could generate still further saving in coal. 2.38 The route to fuel efficiency in China's railway is, nevertheless, towards the higher heat efficiency of diesel and electric locomotive power which also provides increased line capacity over steam operation. This is accepted in China./2 The practical problems relate to questions such as how fast the changeover should be, how much of each should be used, on which lines first and at what costs, and what would the implications be for the phasing down of steam operations and locomotive production. In terms of China's investment resource constraints and present electricity supplies, diesel locomotion is attractive. It has the advantage of low initial invest- ment, speedy project starts, and the utilization of production, overhaul and /1 Internal Document, Chinese Transport Economics Research Commission, November 1980. /2 Energy efficiency of diesel locomotives is estimated by Chinese officials to be 35% compared to 20% for a system using electric locomotives, and 6-8% at present for steam locomotives. However, oil required for diesel fuel is more expensive per calorie of heat than the coal or hydroelectric power needed in an electric system. C46400/J79057/D1018/44 - 30 - maintenance capacity which is either already in place or planned (diesel output has averaged about 160 locomotives per year for the past four years). There are many rail lines on which increased use of diesels would be appro- priate either because traffic volumes are below those clearly needed to economically justify electrification and/or lines in terrain not character- ized by steep gradients and long and numerous tunnels which makes electrifi- cation operationally advantageous. A significant shift to diesel, however, would not be desirable if it meant importing fuel from a world market that may experience a short supply of diesel worldwide. Shifting towards diesel, however, will require an examination also of present locomotive pricing policy which, it has been reported, limits diesel development by high prices and profits, as well as the relative prices of coal and diesel oil. Greater efforts to improve the quality and reliability of diesel locomotives, and the supply of spare parts for them, will also be needed. 2.39 About 20% of the total route-km of China's railway is located in the coastal and northeastern parts of the country, but they carry 80% of the traffic volume. Traffic growth on these higher density line sections will make some of them candidates for early electrification. This will need to be planned in an integrated way, however, taking into account the expansion of power supplies, locomotive manufacture (about 40 electric locomotives per year at present), and the economic evaluation of each major line segment. The issue of locomotive power choice, however, is a complex one involving economic, technical, social and financial implications that are not limited to the internal aspects of railway management and operations. There are spillover effects into the electricity supply, petroleum and coal producing industries as well as relative environmental, labor and national security issues. Steam power is clearly much less energy efficient than diesel or electric which are generally regarded as about equally energy efficient. Furthermore, steam has limited operational capabilities in mountainous areas, tunnels and deserts. In view of China's longer run potential for hydro power development and its lesser current prospects in petroleum, electrification offers energy independence, relatively low operating costs, but much higher initial capital outlays than diesel, and longer gestation periods in becoming operational. Any decision analysis must recognize the Itrade-offs' involved and correctly price inputs such as labor and the alternative energy types in terms of their opportunity costs. In the longer run electrification is the solution for heavy traffic lines, but at this point the Chinese railways do not seem to have a firm plan for modernizing motive power. Line electrification is proceeding but in what may be a disjointed manner. To maximize the impact of the greater amounts of electric traction needed, a detailed plan should be developed which, among other things, would cover the production of modern, efficient locomotives suitable for the operating conditions of the system as well as coordinated rail line improvements where these are justified. Such a plan should also include a strategy for the use of diesel in the short to medium term as a transitional step toward the longer run electrification of large parts of the system. It is clear, however, that given the investments and other C46400/J79057/D1018/45 - 31 - elements involved, shifts in the distribution of motive power can only take place slowly. The result is likely to be, therefore, continued heavy dependence on steam, some increase in diesel and the beginnings of a longer run effort to increase electrification, assuming important decisions are made in the power sector also. 2.40 Coal shipments account for 38%, or over 400 million tons, of the total tonnage moved by rail in China. This compares, for example, with 33% in India (1977-78); 32% in the US (1979); 30% in the USSR from 1928-53; and 10% in Romania - one of the major railways of Eastern Europe. Coal is the main element in China's present energy structure and will continue to be dominant in-the whole transport system. The railway planners assume for planning purposes that 65% of total coal production will end up at the railway. This appears consistent with 1979 coal traffic and production figures./l If coal production increases at, say, 4% p.a. for the next decade, and the current transport coefficient ratio 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 are continued. The amount of investment required can be reduced by, among other things, (i) an increase in the washing of coal prior to shipment, which would remove about 15% of the waste currently transported; (ii) an accurate weighing system for coal cars which, it is estimated, could save 5% of the present coal car fleet because cars are now probably underweighed; (iii) more mine-mouth generation of electricity to reduce coal haulage; (iv) the introduction of large size, unit coal trains which the Chinese authorities have studied for use on selected key routes such as Datong-Qinhuangdao; (v) a modest increase in dieselization on the railway would save the railway from carrying coal for its own needs; (vi) an increased use of water transport; and (vii) 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. 2.41 Intense discussion is taking place within China on the general question of improved longer term distribution systems for the country's coal and, particularly, on the best way to exploit the Shanxi major coalfields, the key to which seems to be investment in railroads and ports. The discussion is probably handicapped, however, by insufficient knowledge about the relative real costs of transport by the different modes; coal demand volumes and locations; industry production plans and location decisions; equipment technology and distribution system alternatives; and so on. The suggestion has been made within China to set up an organization of the RAND Corporation type to do comprehensive, major studies of the type that energy distribution and related transport problems require and to make recommenda- tions for consideration by decision-making bodies. The idea of such a /1 Output 635.0 million tons (0.65) = 413.0 million tons of rail traffic. C46400/J79057/D1018/46 - 32 - comprehensive study has great merit and is consistent with the mission's recommendation that a major transport study somewhat along the lines of the 1980's Indian Coal Transport Study should be undertaken. Such a study could be a joint Chinese-foreign expert venture, financed as a foreign-assistance project aimed specifically at bringing technical and economic -know-how' in this field to China. G. Employment and Training Employment 2.42 Employment generated by transport operations and investments takes two forms - direct and indirect. Direct employment is created by the construction of infrastructure, the manufacture of equipment and rolling stock, and the running of transport services. Indirect employment involves backward linkages to the industries supplying materials (e.g. fuel) and service inputs required by the transport system while forward linkages relate to cargo loading/unloading, service stations, garages and related activities, and government itself. The effect of these linkages weakens rapidly the further one moves from direct employment. 2.43 In the USA in 1978 some 10.7 million people, or 11.4% of the total civilian labor force, were employed in transportation and directly related industries. Of these, 26% were directly engaged in providing transport services; 19% in equipment and manufacture; 4% in government at all levels; and 48% in highway construction companies, gasoline stations, garages, etc. A comparable breakdown is not available for China which., reportedly, has about 7.5 million people employed under the broad heading of "transportation" - railways 2.5 million; roads over 3.0 million; water transport about 1.8 million; and the balance in aviation and ocean shipping. The tradi- tional transport sector is excluded from these figures. On the basis of available information, it is not possible to determine, however, the number of people actually employed in providing transport services in China. Transport organizations provide a variety of other outputs in addition to running vehicles, vessels, planes or trains. The railway, for example, employs about 1.1 million people in 'traffic' functions; 340,000 in industry, i.e. manufacturing locomotives, freight and passenger cars, signalling equipment, etc.; 470,000 in construction, i.e. building rail tracks, schools, houses, offices, hospitals, etc., for railway-system use; 70,000 in medical service provision; and another 90,000 to provide educational services for 1.1 million students from the primary school to university level. In the water sector, enterprises are similarly engaged in equipment and infrastructure construction but no breakdown is available. Until additional information is available at a disaggregated level, it is not C46400/J78983/D1018/47 - 33 - possible to make meaningful productivity comparisons between transport in China and other countries. Nor, on the evidence available, is it possible to calculate labor productivity ratios for the different modes within China. 2.44 Given the need to provide increasing numbers of jobs in China, it may be asked whether the transport sector has a contribution to make. Here again there is insufficient information available to make a safe answer. A recent investigation in India into the "comparative employment intensity per unit of investment" in the different transport modes concluded that in that country inland waterways had the highest employment coefficient, followed by bullock carts. Both of these require low capital investment, but since they are slow moving and useful only for specific purposes their role is limited. Road transport generated much more employment per unit of investment than rail - trucks 17 persons per year per Rs. 100,000 and buses 9 per year, as compared with 4 persons per year on the railways and less than one person per year in aviation (see Table 2.2). It would be clearly inappropriate to suggest these figures apply in China, where a similar investigation is needed. Nevertheless, they are suggestive that if employment creation is a policy objective in China, road transport offers greater possibilities than rail. This question of job creation should be examined in new major project decisions, with the analysis based on prices for labor and other inputs that reflect their real scarcity or abundance (i.e. opportunity costs are necessary in planning). The employment question must be faced because of the pressure to invest in rail electrification on energy efficiency grounds. It may well be that a more capital intensive technology transport system is chosen to avoid bottlenecks which might limit the growth of the national economy and the general expansion of employment but such a decision may not be rationally arrived at given the price patterns currently prevailing in the economy. C46400/J79057/D1018/48 - 34 - Table 2.2: INDIA - COMPARATIVE EMPLOYMENT INTENSITY IN DIFFERENT MODES OF TRANSPORT (1977/78) Persons per year per 100,000 Rupees of investment Inland Water Transport Operations 33.6 Navigational channel development 13.2 Roads and Road Transport Construction and maintenance 27.5 Bullock carts 27.0 Three wheelers 17.1 Trucks 17.0 Buses 9.3 Taxis 3.7 Vechicle production (chassis) 1.8 Coastral Shipping Sailing vessels 20.0 Other shipping 2.4 Aviation 1.0 Railways 4.3 Source: Adapted from Report of the National Transport Policy Committee, New Delhi (India), May 1980, p. 56. Training 2.45 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 turbulent years of the Cultural Revolution. Within each of the main Ministries responsible for transport activities there are universities and technical institutions for the long-term training of cadres. In addition, various short-term training programs are provided and efforts are being made to send more Chinese students abroad to study transport technology, economics and planning. C46400/J91841/D1018/49 - 35 - Scholars and other transport experts visiting are invited to lecture in China. 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 and economic analysis and management decision making. The many specialized institutes which exist understandably fulfill the specific training needs of the particular mode(s) they serve. This can lead, however, to a parochial view of transport problems, operations and research; to an inbred atmosphere of ideas and attitudes; and to defense of transport territory rather than national interest. 2.46 Apparently, there is no institution in China which imparts training to those who have to look at the transport system as an integrated process and plan its evolution in a coordinated framework. To stimulate such training and applied research studies - of the type being undertaken by the recently recreated Institute of Comprehensive Transportation (State Economic Commis- sion) - that would look at transport planning, management, and project evaluation techniques in a multi-modal, interdisciplinary way, a national level center or institute seems desirable. In addition to such a core or central institution, it is desirable that many universities and institutes in a country of China's size take an increased interest in promoting different aspects of transport technology, planning and operations. To ensure that the required training facilities are planned and developed in a coordinated way and, particularly, that the substance of transport training is relevant, an apex body is needed within the framework of the central government. The Academy of Social Sciences, perhaps in cooperation with the China Transport Economics Research Association, might be a suitable coordinating forum for an enquiry into the state of training in the transport sector and the development of a strategic plan for its improvement. Such an inquiry would benefit from the advice of a small selected group of distinguished outsiders who have been closely involved in government, practical transport operations, and academic training in transport economics and planning. 3. RAILWAYS A. Introduction 3.01 The railways in China are the major carrier in the modern transport sector. The system has more than doubled in size since 1949 from 22,000 route-km to about 50,000 km of which 8,000 km were double or multiple track and over 1,000 km electrified in 1979. The railway fleet consists of mainly steam locomotives (78% of the total fleet, with diesel 20% and electric 2%), 260,000 freight cars and 15,000 passenger coaches. Most of the equipment is manufactured locally; sporadic imports have been made in limited quantities with a view more to acquire technology rather than supplementing domestic production. C46400/J79057/D1036/02 - 36 - 3.02 China railways is the third largest freight railway network in the world after those of the USSR and the USA. Freight traffic exceeded 1,000 million tons in 1979, with the major commodities being coal (38%), con- struction materials (15.2%), ores (11.3%), iron and steel (5.8%) and petroleum (5.4%). Passenger traffic was expected to reach 900 million passengers in 1980, with the railway authorities forecasting it will continue to grow rapidly at about 6% p.a. to 1985. 3.03 Operations, which are largely in the hands of 20 regional adminis- trations, appear efficient and show a high level of track and equipment utilization. Only the USSR had higher average freight densities in terms of million ton-km per route-km (23.4) than China, which had about 12 million ton-km per route-km in 1979. Comparative figures for other systems are: USA, 4.5; India (broad gauge only), 4.6; and Romania, 6.3, though there are individual lines in all of those countries which reach over 20 million ton-km per route-km p.a. Freight car turnaround in China, with an average of three days, is extremely good. 3.04 Financially the Chinese railways are reported to be very profitable with revenues in 1979 being twice as high as operating costs, including a depreciation charge, although this charge would not be regarded as realistic on western railways. In 1980, the level of net operating surplus (tax and profits) was to be reduced from 50% to about 30% by increasing the depreciation allowance. Tariffs are said to be high in relation to costs, except for short distance trips where, reportedly, tariffs do not cover costs. Tariffs are uniform throughout the country; thus, they result in substantial interprovincial and, possibly, commodity cross-subsidization because of divergences from the real transport costs involved in providing the services. 3.05 The main problem areas facing the Chinese railways seem to be in: (a) the choice of motive power where, to date, only slow progress has been made to replace steam by more efficient diesel and electric locomotives; (b) the effects of uniformity in operations, i.e. running freight trains of uniform length, standardization of equipment, and the handling of long and short haul passenger services in the same way; and (c) the cross-subsidization between short and long distance traffic and also between regions of the country resulting from the present relation between tariffs and costs. C46400/J78983/Dl036/03 - 37 - B. Institutions, Organization and Management 3.06 The railroads of China have their own Ministry within the State Council. This not only reflects their economic and political importance within the country but also that major decisions as to their role and their share in the distribution of investment funds among modes are made at the highest level of the government. 3.07 The Ministry of Railways is a big, almost self-contained, organiz- ation. It employs nearly 2.6 million people, of whom about 1.5 million are involved in what elsewhere would be labelled the transportation function. The others are engaged in the manufacture of locomotives, rolling stock and spare parts; laying track (except for lines built by the Peoples Liberation Army); educating its railway staff and their dependents from elementary school through university and technical school; and providing medical, housing and other services. This integrated self-sufficiency is paralleled in the railway history of other countries, particularly when support services could not be provided by others in the regions and towns serviced by the railroad. This separation of the railway industry from the rest of society, particularly in managerial education and manufacturing, has had an obvious rationale and many advantages. Nevertheless, it may lead to a degree of isolation in management techniques, analytical methods, and technological orientation. 3.08 The organizational structure of the Ministry encompasses all the functions described above, though some decisions are highly centralized and others decentralized. The actual extent of decentralization in operational and financial decision is unclear, although railway officials emphasize their desire for further decentralization. Structurally, the Ministry is divided on a functional basis with 12 Vice-Ministers, and within each broad functional area there are departments and bureaus. 3.09 The staff and functions of the Ministry are divided broadly into five groups as follows: No. of employees in 1979 ('000) Traffic and operations 1,503 Industry 367 Capital construction 512 Education 90 Others 92 Total Employees 2,564 C46400/J79057/D1036/04 - 38 - Traffic and Operations 3.10 This first function of the Ministry is concerned with the physical aspects of operating and maintaining trains, tracks, stations, signals, etc. - the transportation function which is performed by 20 Regional Railway Adminis- trations (RRAs). In many ways also the organizational structure reflects the railways' present level of technology and is not unlike that in other large countries in the days of steam locomotion. Motive power and passenger cars are controlled and operated separately by each RRA, while freight cars move throughout the system. Exceptions to this rule are made for certain long- distance passenger express trains on which equipment and crews operate across several provincial and RRA boundaries. Thus, centralization occurs in budget allocation strategy and in major investment approval decisions, but control of day-to-day operations is decentralized with supervision exercised by regular daily reporting of events. Carloadings, for example, are reported daily by the RRAs, with the movement of surplus cars being controlled from BeiJing. This tends to ensure effective equipment utilization. Locomotive movements, however, are normally restricted within the RRA of ownership, with power units being exchanged at the RRA boundaries rather than run through. This localiza- tion has a number of advantages for steam locomotive maintenance and opera- tion, but seems prima facie inefficient for diesel and electric locomotives, although further analysis of the situation is needed. 3.11 Within the Traffic and Operations complex of the Ministry the following functions are controlled by separate headquarters units: Transportation - actual train movements and their scheduling Locomotives - administration of motive power and maintenance Rolling stock - maintenance and repair Civil Engineering - track and bridge maintenance, including housing Signalling and Telecommunications Traffic safety Industry 3.12 The second group of activities is a complex responsible for the manufacture of railroad equipment and spare parts. It operates 68 plants as follows: Locomotive manufacturing and maintenance 12 Rolling stock manufacturing 12 Locomotive and rolling stock repair 6 Machinery manufacturing 3 Engineering shops 3 Tie (sleeper) manufacturing 10 Signalling and telecommunications 9 Timber preservation 8 Engineering spare parts 5 Total 68 C46400/J79070/D1036/05 - 39 - Capital Construction 3.13 This third group, in addition to five construction bureaus with responsibilities for actually building rail lines and buildings, also includes five general engineering institutes that deal with design and four specialized engineering institutes for tunnels, bridges, electrification, and building construction. Education 3.14 The fourth main group of activities relates to the many educational institutions of the Ministry of Railways that serve 1.1 million students: Institutions No. Senior colleges 8 Technical colleges 39 Technical schools 33 Middle schools 591 Primary schools 930 Research institutes 1 Science research offices 17 Planning and Investment 3.15 Coordination of railway investment planning is the responsibility of the Planning and Statistics Bureau at the Ministry's headquarters. Neither general plans for the future of the railways nor detailed traffic forecasts were available./1 It appears that the general assumptions being made currently are that freight traffic will grow somewhat more slowly than the national income, and passenger traffic will grow faster. The initiative for new projects relating to railway operations comes mainly from the 20 RRAs, which submit them to Headquarters for approval, coordination, and in the case of major projects, for onward transmission to the State Planning Commission. The RRAs, in turn, may be acting in response to the requests of provincial governments and industries. 3.16 Railway investment was relatively very heavy in the mid-1950s when the war-damaged system was being rehabilitated, unified and extended. The situation in the 1960s is less clear, but many new lines were being constructed. Lately, however, it is evident that railway investment has been reduced and the emphasis shifted away from new lines construction to capacity increases on existing lines (Table 3.1). This seems an appropriate policy. /1 The pattern of route development, however, appears consistent with the 100,000 km network proposed by Dr. Sun Yat-Sen when he was Director General of the National Railways. C46400/J78983/D1036/06 - 40 - Table 3.1: NEW INVESTMENT IN RAILWAYS 1970 1975 1979 1980 -------- (Y billion) --------- New lines 3.383 1.902 1.234 n.a. Modification of existing lines 0.292 0.696 1.108 n.a. New plant 0.104 0.112 0.148 n.a. Acquisition of rolling stock 0.620 0.730 1.000 n.a. Total 4.399 3.440 3.490 3.1 Source: M4inistry of Railways. In addition to these clearly categorized new investments which are considered as capacity additions, the railways make a budgetary provision for 'major repairs' and 'renovation,' which include track and rail renewals, replacement of sleepers, welding of rails, replacement of locomotives, coaches and cars, replacement and improvement of signal and telecommunication and minor modifications to existing lines. In 1980 a sum of Y 3.1 billion was budgeted for these expenditures, most of which would be considered as capital investment in many other railways. 3.17 Although, as mentioned above, there is no approved railway develop- ment plan, future investment strategy directions were expressed as follows, but no indicative figures were available: (a) develop railway capacity in the coal mining areas, particularly Shanxi, Inner Mongolia and Hebei (the region referred to as the North China area); (b) improve main railway lines to ports for imports and exports; (c) improve railway transport generally in the coastal areas to assist economic growth; (d) improve the rail network links from coastal to hinterland areas; (e) improve passenger service; and (f) improve motive power supply. These are all valid general objectives and statements of intent. In practice, they would require detailed evaluation as to costs-benefits, relative priorities and system impacts. C46400/J78983/D1036/07 - 41 - 3.18 The following major projects, consistent with the theties above, are presently under construction. Table 3.2: MAJOR RAIL PROJECTS IN PROGRESS - END OF 1980 Estimated total Construction km cost period (Y bln) The following three lines serve the North China region and transport coal from Shanxi & Inner Mfongolia to Qinhuangdao: Beijing-Datong - electrification (already double track) 377 .20 80-84 Beijing-Qinhuangdao - double track electrification 300 1.20 80-86 Datong-Baotou - double tracking 430 .41 78-90 The following four lines carry coal from mid-Shanxi to the ports of Qingdao and Shijiusuo: Taiyuan-Shijiazhuang - electrif. (already double track) 235 .54 76-82 Shijiazhuang-Dezhou - double tracking 170 .14 78-82 Jinan-Qingdao - double tracking 363 .70 78-85 Yanzhou-Shijiusuo - new single track construction (Japanese financing) 300 .46 80-85 General Baoji-Lanzhou - electrification (single track) 511 .37 78-82 Zhengzhou-Xuzhou - double tracking nearly completed 319 .43 78-81 Hengyang-Guangzhou - double tracking with electrification 540 1.60 79-87 TOTAL 3,535 6.05 Source: Ministry of Railways. C46400/J89537/D1036/09 - 42 - C. Railway Facilities Routes/Tracks 3.19 The system consists of 49,800 route-km, almost all of which is standard, other than for some 800 km at meter or less gauge. In 1979, about 8,000 km were double or multiple track and 1,000 km electrified. Electrification of another 500 km was completed in 1980. Further double tracking and electrification is in progress, as indicated in para. 3.18 above. The main lines are laid with 50 kg and heavier rail, while most other lines have rail between 40 and 50 kg. There is about 7,000 km of long-welded rails. On the main lines, 55% of the sleepers are timber; the rest are concrete. Motive Power 3.20 Motive power represents a critical element in railway planning not only for reasons related to energy issues but also because the entire railway operations are dominated by the use of steam. This limits areas of management, the length and weight of trains, passing tracks, and yards, and a number of other operational features. 3.21 In freight service the steam locomotives are 2,900 hp, the diesels 1,800-3,600 hp and the electrics 5,000-7,000 hp. The steam locomotives present no particular problems except for their inherent fuel inefficiency and distance limitations, particularly in water short areas. They have capacity constraints and limitations also in the mountainous areas with high ruling grades and tunnels. The existing electric locomotives do not appear to present ostensible problems, although the technology may be somewhat outdated. Of the 200 electric locomotives in use, 64 are French-made (25 kV 50 cycle), and the remainder of Chinese manufacture. The diesel locomotives are a problem, however. Of the 2,000 sets, about 180 are imported, of which one-half came from Romania, 50 from France and the remainder from West Germany. The Chinese diesel has its origins in the American made unit (FM-38-D) given to Russia under lend-lease in World War II. 3.22 Recent locomotive acquisitions for replacement and net addition have been as follows: Steam Diesel Electric Total 1970 250 165 25 440 1975 216 126 16 358 1979 300 206 40 546 1980 317 140 40 497 C46400/J89537/D1036/10 - 43 - Since 1975, China has imported 90 diesel locomotives (of which 50 were imported in 1979 alone); but no electric locomotives. The decline of diesel acquisition planned for 1980 represents the reduced investment program. Recent electric locomotive production has been stockpiled in anticipation of completion of new electrified sections and in particular of the 600 km line from Baoji to Lanzhou. Besides the railways, mines and other enterprises acquire about 100 locomotives per year. Rolling Stock 3.23 The railway system operates 259,000 freight cars and about 15,000 passenger coaches as compared to 66,000 and 7,000, respectively, in 1948. FREIGHT CAR OWNERSHIP - 1979 ('000) Open cars 159 Covered equipment 40 Tank cars 33 Flat cars 20 Refrigerated equipment 3 Miscellaneous 4 Total 259 The freight car fleet is young in comparison with that of many other railways, with over one-third of the fleet manufactured after 1965. In recent years, acquisitions have kept pace with traffic growth, but not in 1980. RECENT ROLLING STOCK ACQUISITIONS Coaches Freight 1970 524 13,000 1975 707 13,400 1979 800 12,500 1980 965 9,600 C46400/J89795/D1036/11 - 44 - The cutback in freight car acquisitions in 1980 reduced car supply growth below that of transport demand. On the basis of a 30-year average life, a regular car renewal cycle would require slightly over 8,000 new freight cars/year. The 1980 acquisitions, therefore, probably represent little by way of a net increase in capacity - a situation which could not be main- tained too long without problems. The railways, for example, estimate that every additional 10 million tons of annual traffic requires 2,500 more cars. A 4% p.a. freight traffic growth rate, therefore, would mean a minimum of 10,000 extra cars p.a. Added to the normal replacement figure above, this gives twice the amount actually acquired in 1980. Mines and industrial enterprises also require about 2,000-3,000 cars per year. Passenger coach acquisition has increased over the last few years, reflecting the rapidly rising demand for passenger travel. The railways, however, estimated their annual need for passenger coaches is at least 1,200, which is substantially more than in the 1980 actual acquisition program. 3.24 Most freight cars have a 60-ton capacity. While over 60% of the fleet consists of open cars (gondolas) for the movement of coal, ores, sand and gravel, the railways has started to produce specialized cars such as bulk grain cars, and refrigerated cars. However, in 1975 to 1977 the railways imported some 960 tank cars and 300 refrigerated cars. The equipment is very well maintained and down time is extremely low. D. Traffic Freight 3.25 China's railway is the third largest freight railway in the world after the USSR's and the USA's. Freight traffic has grown from about 100 million tons in 1950 to over 1,000 million tons in 1979, or an average growth rate of 8.6% p.a. More recently (1970-79) traffic has grown at 5.7% p.a., and from 1975-79 at 6% p.a. (Table 3.3). _46400/J89795/D1036/12 - 45 - Table 3.3: ORIGINATING FREIGIHT TRAFFIC (million tons) 1970 1975 1976 1977 1978 1979 % Coal 254.4 316.2 295.7 347.4 402.4 413.2 37.7 Coke 9.1 12.0 11.3 12.0 14.4 14.1 1.3 Petroleum 37.0 62.2 58.0 58.9 61.2 59.3 5.4 Iron & steel products 30.6 41.8 38.9 42.6 58.9 63.9 5.8 Metallic ores 40.7 51.8 46.4 49.9 64.9 61.8 5.7 Nonmetallic ores 32.3 47.4 48.8 54.0 62.2 60.6 5.6 Construction materials 88.9 136.0 136.0 152.2 170.0 166.7 15.2 Cement 12.9 16.0 14.8 15.8 19.6 21.9 2.0 Timber 28.7 35.0 32.2 35.3 38.0 39.6 3.7 Fertilizer 10.0 10.9 9.6 12.0 16.6 18.8 1.7 Grain 20.8 21.9 20.5 24.6 24.6 28.4 2.6 Cotton 1.5 1.4 1.4 1.5 1.5 1.4 0.1 Salt 8.8 8.9 8.5 10.0 10.1 9.0 0.8 Miscellaneous 90.0 105.9 99.0 113.6 130.6 136.4 12.4 Totals 665.5 867.5 821.2 927.1 1,074.9 1,095.0 100.0 (Rounded) Source: Ministry of Railways. C46400/J78983/D1036/13 - 46 - 3.26 The miscellaneous category of traffic in the above table, which includes chemicals, machinery, livestock, fresh fruits and vegetables and less than car-load traffic, is frequently referred to as "Daily Usage Products". Better information about the mix of rail traffic would be desirable but a few key elements can be seen. Coal is clearly the single most important commodity, accounting for 38% of all traffic tonnages. Energy products, as a group, accounted for 44% of all originating traffic. A striking feature is the low volume of foods. Foodgrains, for example, amounted to only 2.6% of total tonnages in 1979, and other food stuffs are masked in the miscellaneous category. For two RRAs where data on perishables and livestock were available, about another 1% would be added to the above grain percentage. By contrast, in the USA where the motor carrier is used extensively, particularly for perishables, food and food products account for about 15% of rail originations, and in India foodgrains, fruits and vegetables and other agricultural products account for 19% of total railway ton-km. This relatively small traffic in agricultural products in China is a reflection of the policy of intra-regional self-sufficiency. Passenger 3.27 Intercity passenger traffic is almost exclusively by rail, with great pressure falling on the 780 scheduled passenger trains operated daily in late 1980. The amount of passenger-km travelled has grown at about 5.5% p.a. since 1970 (Table 3.4). The railway authorities anticipate passenger traffic will grow at 6% p.a. through 1985, a rate faster than for freight. This would mean a total of 1,200 million passengers carried, or 300 million more than in 1980. Such an increase will require substantial investments in passenger equipment as well as in line and station improvements if public frustration is to be minimized. In India inter-city rail passenger traffic was predicted to grow at 4% p.a. during the Fifth Five-Year Plan, but the actual traffic increase was 7% p.a. and at a time when road transport was growing faster than it is in China. It is clear that in China the amount of passenger traffic by rail is determined more by the capacity provided by the railways than by the response to market demand - a situation in striking contrast with many of the world's railways which have excess passenger capacity. C46400/J78983/D1036/14 - 47 - Table 3.4: PASSENGER TRAFFIC 1980 1970 1975 1976 1977 1978 1979 estimate Passenger (million) 516.5 696.5 704.9 786.6 807.3 856.1 900.0 Intra-region 462.3 465.5 522.0 534.4 570.0 Suburban 162.6 167.7 186.2 190.0 194.6 Inter-region 71.6 71.7 78.4 82.9 91.6 Passenger-km (million) 95,259 95,470 102,015 109,081 121,373 Intra-region 36,690 37,355 41,239 43,179 48,137 Suburban 3,642 3,843 4,300 4,406 4,577 Inter-region 54,927 54,272 56,476 61,496 68,659 Average Distance (km) 137 135 130 135 142 Intra-region 79 80 79 81 84 Suburban 22 23 23 23 24 Inter-region 768 757 720 742 750 Source: Ministry of Railways. C46400/J78983/D1036/15 - 48 - E. Operations Freight 3.28 The demand for rail freight service arises, in theory, from the national economic plan approved by the State Planning Commission and the Council of Ministers, with each ministry providing an estimate of its trans- portation needs, which are then balanced against the capacity constraints of the railway system. The balancing of such an input-output matrix in even a small country is a major task. In China it works in aggregate terms because of fixed coefficients drawn, it seems, from a rudimentary input-output matrix, which assumes rail market share coefficients for production as follows: Product % of output moved by rail Coal 65 Petroleum 50 Steel 57 Cement 30 Grain 8 3.29 The various RRAs translate the Ministry's and other plans into actuals for their own administration, but if plans exceed capacity limita- tions, a series of reiterations is worked backwards through the Planning Commission. Since transportation is a critical element in the plan, agreement is necessary to assure service to key enterprises. The railway authorities seem to make the final decisions on capacity allocation, investment timing, etc., and may thus require provinces and enterprises to modify their production plans accordingly. Since, however, much rail transportation is for established industrial, mining and construction activities, this seems to give relative stability in the allocation process but the pressures for added rail capacity are strong. 3.30 Freight traffic density has been increasing steadily (Table 3.5) and, at an average of 11.8 million ton-km per route-km, is now the second highest in the world after that of the USSR (23.4 million ton-km per route-km in 1975). Some lines in the northern coastal regions of China have freight densities in excess of 25 million ton-km per route-km. By contrast, on some of the newer and lighter traffic density lines, traffic levels may be in the order of only 3 million ton-km per route-km. Even these, however, are comparable to average densities in Canada (2.7 million), India (4.6 million), and the USA (4.5 million). In Western Europe and Japan average freight densities are only around 1.1-1.7 million ton-km per route-km. C46400/J79070/D1036/16 - 49 - 3.31 Average distance hauled per shipment has remained relatively constant over the last two decades or so in the 480-520 km range. This is mainly because, unlike in many other countries, significant amounts of short distance traffic in China have not yet been diverted to roads. Train weight also changed little in the last decade, but train speeds have declined some- what as traffic increased (Table 3.5). Wagon turn-around time is extremely low by any other railway standards and has improved since 1970. It is difficult to see further savings here. Table 3.5: SELECTED OPERATING STATISTICS - FREIGHT Freight density Average Trains/km Gross wt. Average Turn-around (million distance per day per train speed days /a tons/km) (km) (tons) (km/hr) 1970 8.7 525 21.9 1,953 30.3 3.21 1975 9.4 489 22.9 2,012 28.5 3.46 1979 11.8 510 27.3 2,059 28.6 3.00 /a Turn-around time is obtained by dividing total cars in operation in the system by the number of car loadings. It is apparently a management tool used by the central as well as by each regional administration. Source: Ministry of Railways. 3.32 The number of freight cars per train has remained relatively constant at between 48 and 53 cars. This is largely a consequence of the length of passing loops and station sizes, which are 650 meters for 75% of the stations and 850 meters for the rest. A 53-car train would require the full 850 meters. The cost-benefit of selectively increasing loop and station lengths should be investigated. 3.33 An interesting aspect of operations is the 'bad-order ratio' for cars, which is over 10%. Between 70% and 80% of car bad orders were caused by loading and unloading operations, 20% by wheel wear and a low 1-2% by -hot boxes.' Derailments are rare, which is not surprising considering the track maintenance standards and the staff discipline. The very low reported hot box factor on a system that does not use roller bearing cars has interested foreign railway engineers visiting China. Manual loading and unloading by railway employees appears to be the predominant method of operations. Station yards appear to be the rule for all but the larger plants with sidings, with distribution from these yards being by a variety of modes, including human and animal power. C46400/J78983/D1036/17 - 50 - Passengers 3.34 Passenger trains are classified as super express, express, and ordinary, with a fare differential for super express and for foreigners generally. There is little specialized suburban equipment and stations, which means that short trips put considerable burdens on the rest of the system, particularly on the approaches to large cities and stations such as Beijing and Shanghai, which are heavily congested. Increased tourism is also constrained and a burden on the rail system since, at present, air transpor- tation is a limited alternative for much passenger transportation. The average passenger density on the system has grown with the traffic: Itillion passengers Passenger trains per route-km per route-km/day 1970 1.8 8.7 1975 2.1 9.1 1979 2.6 11.1 As a result of increased congestion, average passenger train speeds have decreased from about 42 km/h in 1970 to 38 km/h in 1979. 3.35 On-time train performance is high, reportedly 95% for passenger trains and 90% for freight trains. Adherence to schedules is very strictly enforced, but the strong and long attachment to present schedules may prevent adjustments that would introduce greater flexibility in the system and possibly lead to capacity increases. F. Tariffs and Costs 3.36 The information available on tariffs and costs was very limited. The Chinese railway tariff structure is simple and consists basically of five full carload (FCL) commodity groups, and five less than carload (LCL) subgroups. Rates are expressed on a distance basis with a tapered scale (Table 3.6). The present rates have been unchanged since 1967 and, according to railway staff, are 12% below their 1955 level. C46400/J90846/D1036/18 - 51 - Table 3.6: SELECTED FREIGHT RATES (Fen/ton-km) Commodity Group 1 2 3 4 5 Distance (km) 100 1.20 1.20 1.70 2.10 2.70 500 0.96 1.04 1.58 2.00 2.46 1,000 0.92 1.02 1.39 1.78 2.17 2,000 0.92 0.98 1.18 1.43 1.75 Ratio of rates 500 km/100 km (%) 80 86 93 95 91 Ratio of rates 2,000 km/100 km (%) 77 82 69 68 65 Source: Ministry of Railways. 3.37 As can be seen in the above table, the tapering of rates as a function of distance varies among the commodity groups. For groups 1 and 2, rates per ton-km do not decrease very much beyond 500 km, while for groups 3 to 5 there is very little taper at 500 km, but more at 2,000 km than for groups 1 and 2. The rationale behind this needs further clarification. 3.38 Traffic statistics are kept in 14 commodity groups (Table 3.3), but traffic data are reportedly not available by freight rate groups. In particular, the traffic classified as miscellaneous, which accounts for 12.4% of total tonnage, can fall into any of the above mentioned FCL and LCL classes. The railways estimate that about 54% of freight traffic falls in tariff class 1 and another 18% into class 2. Thus, almost three quarters of the traffic falls into the two lowest tariff classes, i.e. class 2 rates being only about 10% higher than class 1 rates, while those of class 5 are double those of class 1 (Table 3.6). 3.39 For the current average freight haul of about 510 km, costs are estimated at 0.80 fen /1 per ton-km. This is substantially lower than the rates charged for the various commodity groups at 500 km: /1 100 fen = 1 yuan. C46400/J78983/D1036/19 - 52 - Fen/ton-km Coverage of average cost Average cost at average distance of 510 km 0.80 Tariffs for 500 km Class 1 0.92 1.15 " 2 1.04 1.30 " 3 1.58 1.98 " 4 2.00 2.50 " 5 2.46 3.08 In addition to the above distance related rates, there are additional charges for loading, unloading, and for moving empty cars, which provide additional revenues, particularly for short-haul movement. Furthermore, traffic carried less than 50 km pays the minimum tariff rate for 50 km. Again no detailed data were available regarding either the traffic moving on short distances or the cost of handling it. However, there are indications that short-haul traf- fic generally does not cover its cost. 3.40 The entire role of railway prices and costs is difficult to inter- pret in a nonmarket economy. There are indications, for example, that the relative costs to the railway of coal for steam locomotives and oil for diesel locomotives are not proportional to their true costs. The reasons and consequences are unclear. Since there has not been a review of tariffs since 1967, it is clear that pricing policy is less important as an allocative mechanism than quantititive restrictions on availability of transportation. 3.41 The fact that freight rates are uniform throughout the country involves some regional cross-subsidization. This is a recognized policy of the Government and represents a sharing of the rail operating costs of development in mountainous regions, where transport costs are higher, with those in easier terrain such as the coastal areas. The manner of cross-subsi- dization seems, in practice, to be as follows, with the mechanics of cash flows being controlled by the Ministry in Beijing. All revenues are credited to it. The Ministry then returns funds to the RRAs on the basis of fixed rates based on "converted" ton-km (traffic units in which one passenger-km is equal to one ton-km). These fixed rates for each RRA are established occasionally (the last time was in 1980), on the basis of: (a) the characteristics of the traffic handled by the particular RRAs; (b) the infrastructure and equipment mix available in the RRAs with regard to age, type, technology, etc.; and C46400/J89537/D1036/20 - 53 - (c) the topography of the region, i.e. in a mountainous region such as Kunming 400 kg of coal is needed to move 10,000 converted ton-km, while in flat terrain such as the Beijing area, only 100 kg is needed. As an example of the rates passed back to RRAs, the Zhengzhou RRA receives Y 115.8 per 10,000 converted ton-km while Kunming receives Y 287.0. 3.42 The full implications of the present tariff system cannot be derived in the absence of more detailed information on costs by distance, commodities, and region. Clearly, as long as the railways retain their quasi-monopolistic position in the transport sector, prices substantially higher than costs can be imposed. But if enterprises secure their own motor transport, and can run it below national average rail costs, worldwide experience suggests they will take away the low cost but high priced rail movements. G. Finance and Accounting 3.43 As for prices and costs, the presently available information on finance and accounting in the railways is only sketchy. Accounts are maintained at three levels under the general control of the Ministry: - the Regional Railway Administrations (RRAs) (20) - the branches of the RRAs (60) - the stations and depots (4,867) The Ministry deals directly only with the RRAs, which in turn supervise the functions of their branches, stations and depots. 3.44 Within the present system of costs and tariffs, the railways are clearly an important source of public savings and are highly profitable. Until 1979 operating revenues were regularly twice as large as operating expenditures, including depreciation. In 1980, planned profits were to be reduced to 30% as a result of increased allowances for more realistic depreciation amounts. 3.45 The amount provided for depreciation is said to consist of two parts - one termed "heavy repair depreciation" and the other "basic C46400/J89537/D1036/22 - 54 - depreciation." On the basis of limited information, what follows is an inter- pretation of the treatment of depreciation. In 1980, the heavy repair depre- ciation amounted to Y 1.76 billion and the basic depreciation to Y 1.5 bil- lion, representing respectively 3.5% and 3% of fixed assets in use valued, reportedly, at historical costs. On the basis of the above percentages rail- way assets would amount to Y 50 billion ($33 billion). Railway staff indi- cated that they had been considering a revaluation of assets but that no decision had so far been made. 3.46 The funds under the "heavy repair depreciation" heading are control- led by the Ministry and the RRAs and used for track and rail renewals, replacement of sleepers, welding of long rail, and repair of locomotives, coaches and cars, signals and telecommunications equipment, mechanical equip- ment, and buildings. The funds under "basic repair depreciation" are control- led partly by the Ministry and partly by the RRAs and are used for renewal of locomotives, coaches and cars, and mechanical equipment, for minor additions to fixed assets, and for minor modifications to lines to increase local capacity. 3.47 Two preliminary conclusions can be drawn with regard to railway finances. First, the present system gives incentives to the individual RRAs to secure as much new investment as possible, since capital is free and adding it increases profits and retained earnings for depreciation. And, second, renewing equipment and minor line improvement through the basic repair depre- ciation funds are probably less rigorously evaluated than are new investments. While in traffic operations, the systems' capacity is intensively used, excess capacity may well exist in the manufacturing and maintenance facilities. H. Conclusions and Recommendations Traffic Demand and Capacity 3.48 The Chinese railways are operating at or near capacity in large parts of the system. As compared with many other railways, use of equipment is intensive. Average traffic density is high and even very high on some eastern seaboard lines. On the Shenyang-Beijing line, for instance, there are 206 trains a day, or a scheduled train every 7 minutes, leaving little time for maintenance. Freight traffic densities of up to 30 million ton-km per route-km p.a. exist on some eastern lines. This is one reason for serious bottlenecks reported in 1978 and 1979 on some lines, particularly those used for the transport of coal. .C46400/J89537/D1036/23 - 55 - 3.49 Total tonnage decreased in 1980, as coal and oil production fell slightly and major industrial and other projects were postponed, but capacity problems in main lines do not appear to have eased. The railway planners indicate that the current economic policy shift away from heavy to lighter industry may reduce some of the short-term pressure on the railway and has already had some benefits in relation to short-haul traffic. However, if coal is called upon to substitute for petroleum use in large amounts, extra pressure will be imposed on the system by the need to haul this coal, in addition to the normal traffic growth and the rising pressure for more passenger travel. 3.50 Basically, the Chinese railway system does more than it should be called upon to do in comparison with the transportation network in other countries. It handles a sizable amount of short-haul traffic, both freight and passenger; its pricing policies, as well as those of alternative modes, puts traffic on rail which could more efficiently flow on other modes. Con- sidering the present energy balance in China, however, and the time needed to make the adjustments which would promote a better distribution of traffic among transport modes (by lessening dependence upon rail for activities in which it is of lower efficiency), large investments will continue to be needed to increase the capacity of the railway if the recurrence of severe bottlenecks is to be avoided. Motive Power 3.51 Probably the single most important issue facing the railways at this point is the choice of motive power. Slow progress has been made in replacing steam which still powers 78% of the locomotives. The installed capacity to manufacture diesel locomotives is not being fully utilized in part because of technical problems which, in turn, reduce the operational availability of the locomotives which have a bad-order ratio of around 16% for design and quality reasons. 3.52 Electrification of the Chinese railways has been slow. Even though the decision to begin electrifying the first section of line between Baoji and Chengdu was taken in 1958 and some trains started running in the early 1960s, full electric operation was not achieved until 1975. Besides electric power shortages, there have been technical problems with the locomotives as well as with the lines, particularly interferences with signalling and telecommunica- tions. However, the main problem is the high investment cost involved. 3.53 The issue of locomotive power choice is a complex one involving economic, technical, social and financial implications that are not limited to the internal aspects of railway management and operations. There are spill- over effects into the electricity supply, petroleum and coal producing indus- tries as well as relative environmental, labor and national security aspects. Steam power is clearly less energy efficient than diesel or electric which are about equally energy efficient. Steam, however, generates more employment in coal production and train operations, but has limited operational capabilities C46400/J91841/D1130/36 - 56 - in mountainous areas, tunnels and deserts. In view of China being potentially rich in hydropower and less so in petroleum, electrification offers energy independence, relative operating cheapness but higher initial capital outlays than diesel and longer gestation periods in becoming operational. Any economic analysis must recognize the trade-offs involved and correctly shadow-price inputs such as labor and the alternative energy types. In the longer run, electrification is probably the solution for heavy traffic lines, but at this point the Chinese railways do not seem to have a firm plan for modernizing motive power. Line electrification is proceeding but in an apparently disjointed manner. To maximize the impact of the increased amounts of electric traction needed a detailed plan should be developed which, among other things, would cover the production of modern, efficient locomotives suitable for the operating conditions of the system as well as coordinated line improvements where these are justified. Such a plan should also include a strategy for the use of diesel in the short to medium term as a step toward the probable longer run electrification of large parts of the system. Operations 3.54 The Chinese railway has-a high level of utilization of its equipment and infrastructure, but operations are extremely uniform. Equipment used for passenger service is the same for long distance services and for short distance commuting within the vicinity of large metropolitan areas. One consequence is that the capacity of passenger stations in the largest cities is somewhat restricted. The introduction of some flexibility and specialized equipment in both freight and passenger services could probably release some capacity in the system. On the passenger side, for example, push-pull equipment could increase station capacity allowing more train movements; on the freight side, the wider use of unit trains, the preblocking of trains and the use of through trains could ease some of the pressure on yards and stations. Tariffs and Costs 3.55 Without additional information, little can be said about this difficult area. Short distance tariffs do not appear to cover costs; unified tariffs throughout the country imply regional cross-subsidization of railway users which, while they may have some desirable income distribution effects, have probably induced some uneconomic location decisions. 4. HIGHWAYS AND HIGHWAY TRANSPORT A. Introduction 4.01 Prior to 1949 little attention had been given to the development of highways and highway transport, particularly in areas away from the coast. At the establishment of the People's Republic, there were only 80,000 km of 46400/J89537/D1130/37 - 57 - motorable roads in all of China, and, of these, about half were earth roads, the rest surfaced with gravel. They were planned not to compete with the railways but to supplement them. Road building was one of the mass projects to which millions of peasants were assigned during the Great Leap Forward. By 1979 the road network had grown nearly elevenfold to 870,000 km. This consti- tutes an average annual addition of more than 25,000 km, or a growth rate of nearly 9% p.a. Motor vehicle transportation has been growing at an even faster rate, since 1975 at an average 14.5% p.a. These developments have been of significance in improving local commerce and the postal service, and in unifying the country. Time savings have been significant, though discomfort often remains since about 45% of the network is unimproved earth roads. Markets have been widened and output formerly unsaleable has been marketed. Good roads and effective government have gone together. 4.02 Despite the progress of the past 30 years and the fact that China-s road network is now about the sixth largest in the world, it is still only 60% as large as that of India or Brazil or roughly equal to that of Canada or Australia. The roads and road transport situation in China today can only be characterized as underdeveloped. The total of 876,000 km constitutes approxi- mately 9.4 km per 10,000 population or 91 km per thousand sq km area; compara- tive figures for India are 16.1 and 293 km, and for Brazil 130 and 168 km, respectively, thus reflecting the underdeveloped state of the network. In Sichuan province alone, for more than 10 million people in 1,100 communes the nearest road is more than 30 km away (which distance can only be traversed by animal or on foot); in China as a whole more than 5,000 communes and 300,000 production brigades are said to have no road access. Moreover, existing roads are generally of low standard in terms of alignment, bridge design and especially pavement condition and strength. Everywhere motor vehicles are hindered by slow-moving vehicles and pedestrians. The number of motor vehicles per person is considerably less in China than in India. Most vehicles are of outmoded World War II design which have high costs of operation, including excessive fuel consumption. Roads carry only about 28% of tonnage or less than 3% of ton-kilometerage in China, compared to more than 34% and 18% in India, and 80% and 71% in Brazil, respectively. The new economic policies, if allowed to develop strongly, seem likely to have a profound impact on the costs and structure of the road transport industry in China, and to some degree on the role of highways vis-a-vis railways, by inducing more efficient utilization of the vehicle fleet, reducing necessary empty running and transshipment costs, and diverting short-haul traffic from the railway. C46400/J91841/D1130/38 - 58 - B. Road Institutions, Organization and Management Overall Organization 4.03 The Highways Bureau (HB) of the Ministry of Communications (MOC) is formally responsible for the planning of trunk roads, and it also operates some road transport services. The design, construction and maintenance of trunk roads are the responsibility of the Provincial Transport Bureaus (PTB); the PTBs also operate road transport services. Two characteristics of the roads organization in China are noteworthy: (a) the same governmental agencies (at the central, provincial and lower levels) which construct and maintain the road infrastructure, as pointed out above, also operate public road transport services; and (b) the role of the central government in the direct planning, financing and administration of road and road transport services is relatively minor, with the primary responsibilities being carried by the provincial and lower levels of government. 4.04 Each of these characteristics offers advantages and opportunities but also entails weaknesses. Properly exploited, the integration of infrastructure and road haulage functions in the same administration can provide a better overall perception of priorities among new investments, maintenance of existing infrastructure and road user costs. It can also contribute, however to forces favoring restriction of competition and high tariffs, thus leading to excess capacity and high costs of road transport. This may have happened in China, as tariffs appear to have been set at relatively high levels to allow for a large profit margin by the PTBs, thus encouraging enterprises to buy their own vehicles, while regulations prohibi- ted the use of these vehicles in competition with the PTBs for other haulage. 4.05 A high degree of decentralization is to be expected in administering the road system, and especially in operating transport services, in a country where the area and population of many provinces exceed those of entire nations. What is surprising, however, is the limited role of the central government since the early 1960s in planning, research and, most importantly, the direct financing of development of the highway system. The central government reportedly played a much more active role in the rapid build up of highways during the 1950s, particularly in an effort to relieve some of the burden on the poor condition railway and to open up southwest China. Subse- quently, however, responsibility for roads was delegated to the provinces and lower levels of government such as counties and communes, and the staffing of the Highway Bureau was reduced to less than one tenth its former size of 400. Apparently the total expenditures on roads also declined, since the reduction C46400/J89537/D1130/39 - 59 - in central government outlays was not fully compensated by the provinces and lower levels. In any event, the PTBs now play the leading role in planning, financing, design and construction of roads as well as in providing assistance in all these facets to the lower levels of government. Planning 4.06 A formal highway planning process has been developed at the central level, although it is not clear how technically advanced or effective the process is. The central government contributes only a small proportion of total road expenditures, but exercises influence in various ways. Provinces and municipalities prepare their own highway plans within the framework of the central plan. 4.07 The provincial transport bureaus and the MOC are presently preparing medium- or long-term plans in line with the national readjustment policy. The PTB plans are to be approved by the Provincial Planning Commission and submit- ted as a matter of record to the MOC. For large and medium-sized projects, it is necessary to ask the State Planning Commission for approval. In 1981, the three Highway Survey and Design Institutes under MOC will undertake the feasi- bility studies for some major new projects. Design and Supervision of Construction 4.08 While the MOC determines overall road design standards, the specific field engineering designs are normally prepared by Design Institutes of the PTBs. The PTBs also provide the designs for roads and technical assistance in their construction to the lower levels of government within the provinces concerned. For major projects, the Design Institute provides staff for construction work, although the PTB is generally responsible for supervising construction. Construction and Maintenance 4.09 Construction works, including those on national highways, are executed by the construction unit of the PTBs or relevant lower level of government. The HB is responsible for the appraisal of design and supervision of construction of major projects, while highway bureaus of local governments are responsible for minor projects. In 1980, the MOC established the China Overseas Roads and Bridges Engineering and Construction Company which has been active in a number of other developing member countries of the Bank. C46400/J89537/D1130/40 - 60 - 4.10 Maintenance of existing roads is typically the responsibility of the PTB. Maintenance activities appear to receive first priority, are well orga- nized and are funded through road maintenance taxes, although a part of road maintenance taxes are also used for construction (para. 4.40). Training 4.11 While more than 3 million people are engaged in road infrastructure activities in China, only about 40,000 have had any significant technical training. The MOC considers the technical proficiency of many of these exist- ing technical staff to be inadequate and efforts are being made to overcome the situation. While one national institute focusses exclusively on training highway engineers (Xian Highway Institute), eight universities have highway engineering departments, and each province has its own institute for voca- tional and technical training of lower level highway staff. Technical man- power planning for the highway sector is only now resuming in the aftermath of the turbulent years of the late 1960s and early 1970s. 4.12 The Xian Highway Institute, originally established in 1958, current- ly has a staff of 1,600 (450 teachers) and 2,500 students in a 4-year training program which offers 11 specialties, including mechanical and automotive engineering, finance and economics as well as traditional civil engineering courses. Some of the faculty also engage in research part-time. The Insti- tute, which was affected by the Cultural Revolution, appears, however, to stiffer from severe budgetary constraints and shortages of adequate facilities, laboratories and computational equipment and libraries, which limit its potentially significant contribution to rising professional standards in the highway sector. C. The Road Network 4.13 As shown in Table 4.1, some 92,000 km of roads were added to the network between 1975 and 1979, or approximately 23,000 km per year. Of the 1979 network, 151,000 km were blacktopped. C46400/J89537/D1130/41 - 61 - Table 4.1: HIGHWAYS NETWORK ( 000 km) 1975 1976 1977 1978/b 1979 Total Roads (nonurban) 784 823 856 890 876 Paved (full asphalt 92 108 126 143 151 or brick) More than 2 lanes - - - - 0.188 2 lanes - - - - 118 Less than 2 lanes - - - - 33 Unpaved 692 716 729 746 725 Improved/a 405 424 435 456 496 Earth surface 287 292 294 290 229 /a Occasionally passable in rainy season but not up to all-weather standard. /b Preliminary results of a 1979 road survey indicate that the 1978 estimates of road mileage may have been too high. Source: Ministry of Communications. 4.14 While its importance in the transport scene is increasing, the highway network is very much a system of feeder roads into the railways. However, in western China, due to the sparse railway network, long distance transport relies mainly on highways. D. Design Standards and Practices Geometric Standards 4.15 From the geometric standards of classified highways in China shown in Table 4.2, it can be seen that design speeds are severely restricted for road classes 3 and 4 which constitute 98% of the classified network, and they are moderately restricted for the remaining 2% (11,000 km) of class 2 roads. Class 1 may be ignored since only 188 km exist. C46400/J89537/D1130/42 - 62 - Table 4.2: HIGHWAY GEOMETRIC STANDARDS Class 1 Class 2 Class 3 Class 4 Plain Hilly Plain Hilly Plain Hilly Plain Hilly area area area area Design travel speed km/hr 120 80 40 60 20 40 20 Subgrade width (m) >23 10-12 8.5 8.5 7.5 4.5 6.5 Surface width (m) 2x7.5 7-9 7 7 6 3.5 3.5 Min. radius of horizontal curves (m) 600 250 50 125 25 50 15 Non super-elevated Radius of horizontal curve (m) 2,000 1,000 250 500 150 250 100 Max. gradient (%) 4 5 7 6 8 8 9 Min. passing sight distance 160 75 110 40 75 34 40 20 Source: Ministry of Communications. 4.16 On most roads, particularly in eastern China and near large towns, motor vehicles seldom achieve the design speed due to the mixed volumes of slow-moving tractor-type vehicles, bicycles, hand-carts, animals and pedestrians. On a few roads (primarily within the large cities) efforts have been made to separate traffic streams by providing separate lanes. These are clearly helpful and given the traffic volumes, no other solution is apparent, although costs are high since road width requirements are often doubled. More commonly, roadside obstructions - and particularly trees, which have become a major feature of nontransport policy - decrease the effective width of the road and constitute serious safety hazards. Pavement Standards 4.17 Possibly the most notable deficiencies of China-s road system are the low standard of pavements and the limited extent of the paved network. This is partly due to a shortage of good materials, particularly asphaltic binders, and in some areas the absence of natural gravel or rock. It is also due, in part, to weak design practices and quality control in construction. Chinese crude petroleum has a high paraffin content and yields only low quantities of rather poor quality asphaltic binders. As a result, the great majority of petroleum-based pavements in China are not true asphalts as found in most countries, but rather a type of oiled gravel made from the residual oils from the refining process. Experience in China and elsewhere (e.g. Norway) has shown that these residual oil pavements are reasonably satis- factory for low pavement loadings, but they have limited strength and cannot normally be used for highways with heavy traffic. C46400/J91841/D1130/43 - 63 - 4.18 High traffic volume routes are normally surfaced in China with asphalts (sometimes imported, e.g. from Albania) or, in some cases, and primarily in the cities, with portland cement concretes. The portland cement concrete pavements, some of which appeared quite old, generally provided a much higher quality of riding surface than much newer asphalt roads. However, portland cement is said to be in short supply and its costs prohibitive. Given the problem of road surfacing, the limited use of coal tar in road-making in China - despite the abundance of the raw material is not easily understood. 4.19 The use of continuously graded aggregates is shunned in road surface construction in China in favor of gap-graded mixtures, stone soling and parti- cularly macadam, which is used extensively in blacktopped roads (most commonly in an oil-residual penetration). Such materials and designs are more versa- tile and can be manufactured and laid using either manual or equipment methods or a combination thereof. Mud-bound macadam (MBM) is also used extensively as a final surface; about 240,000 km of MBM-surfaced roads are in service today. The MBM-surfaced roads were substantially rougher than a natural gravel road would normally be. 4.20 With the exception of portland cement concretes, few of the road pavements observed in China could long withstand the officially promulgated 13-ton axle-load design standard. Although axle-load weighing surveys have not been done, it would seem probable that few truck axle-loads would exceed 6 tons because of the vehicle technology in use. Fortunately also, even animal-drawn vehicles all appear to have pneumatic tires, thus avoiding the extreme pavement stresses generated by steel-rimmed wheels common in some other Asian countries. E. Construction Technology, Standards and Costs 4.21 Construction is executed by departmental forces ("force account") using in many instances (particularly in the cities) a relatively capital- intensive technology; indeed, several civil construction activities observed in the cities were as mechanized as those in North America. Bulldozers, loaders, small tipping carriers, rock crushers and small to medium-sized asphalt mixing plants are commonly observed, as are the ubiquitous steel- wheeled rollers. Only one mechanical paver, however, and no motor-graders were observed by the mission, although such equipment is said to be manufac- tured in China. A common view among highway engineers in China is that more road construction machinery is needed, but no cost comparisons with more tra- ditional techniques were available. In the context where civil works are all executed by force account, questions of cost effectiveness may not have been a primary consideration in the choice of technology. The policy shift toward modernization through the use of heavy equipment has doubtlessly been C46400/J89537/D1130/44 - 64 - reinforced by the severe underpricing of capital in the Chinese economy. Based on experience in India and other similar countries, and considering that the prevailing wage for unskilled/semiskilled construction workers is $1.25 per day (Y 40 per month plus 20% fringe benefits), it seems likely that some construction activities already mechanized in China, e.g. earthworks excavation, materials haulage over short distances and possibly stone crushing, could be done more economically by manual methods. 4.22 Comprehensive data on highway construction costs were not available, but some examples from the provinces visited are given in Table 4.3. Compared to costs in other countries they appear relatively low, although it is not clear how meaningful such comparisons are considering pricing policies fol- lowed. It is known, for example, that no interest and very low depreciation are normally charged for capital goods, although the original purchase price is likely to be set high if practices in other economic sectors apply here also. For the one province (Sichuan) where the composition of costs was available, the data for new construction costs indicate a higher proportion to materials and a lower proportion to equipment and labor when compared with other countries. The prices of construction equipment (other than trucks, Table 4.3) were not available. 4.23 Quality control in road construction is weak in some aspects, for example, lack of temperature control in bitumen work, unevenness in spreading of aggregates, and uneven riding surfaces. This is due to management problems and shortages of skilled staff and modern construction equipment. F. Maintenance Technology, Standards and Costs 4.24 Road maintenance is well organized in China and currently absorbs much of the attention and resources of the provincial and other road autho- rities. As seen from Table 4.3, expenditures in some regions are of the order of $1,400-1,500 (Y 2,000-2,200) per kilometer per year. Taking into account the relatively low-wage environment in China, the limited use of equipment, the apparently effective use made of maintenance funds, and the generally light traffic, the above maintenance costs appear to be slightly high compared with other countries. It may be that in some cases excessive maintenance efforts are being made to preserve badly deteriorated pavements which could more economically be replaced. In Sichuan maintenance requires an average of one ton of asphalt per kilometer of blacktop road per year, thus absorbing the bulk of the available supplies of that scarce commodity. 4.25 Maintenance work is more labor intensive than construction; rela- tively little equipment is involved (primarily hand tools, portable bitumen heaters, and trucks for long distance haulage of materials). The labor force is organized in basic units of 13 to 14 people working 10 km near their homes so they can easily walk to work and costly transport is avoided. C46400/J78814/D1115/40-41 ('6 Table 4.3: ILLUSTRATIVE DATA ON COSTS OF HIGHWAY CONSTRUCTION, IMPROVEMENTS AND MAINTENANCE Costs Composition of Costs (%) Activity Unit (Y '000) ($ '000) Admin. Labor Equip. Material Land & Source other New Construction Class 2 Road (flat terrain) km 130 88 - - - - - Shaanxi PTB Class 2 Road (mtn. terrain) km 230 156 - - - - - Shaanxi PTB Class 2 Road incl. blacktop km 250-300 169-203 - - - - - Jiangsu PTB Class 1 Road, restricted access km 1,250 845 - - - - - Jiangsu PTB Class 1 Road (excl. land & structures) km 600 406 - - - - - Shanghai TB New asphalt pavement km 48 32 11 6 5 75 3 Sichuan PTB Bridge, arch type m 19.2 13 14 6 6 43 31 Sichuan PTB Bridge, arch type m 3.4 2.3 - - - - - Sichuan PTB Bridge m 3-4 2-2.7 - - - - - Jiangsu PTB Road Improvements Existing low standard road to class 3 (excl. pavement) km 105 71 24 30 5 28 13 Sichuan PTB Road Maintenance Blacktop roads km 2.1 2.4 12 42 7 39 - Sichuan PTB Gravel roads km 2.2 1.5 15 58 8 19 - Sichuan PTB Overall avg. (blacktop roads 50% more than gravel roads) km 2 1.4 - - - - - Jiangsu PTB Materials & Supplies Asphaltic cement ton 100-200 68-135 - - - - - Jiangsu PTB Residual oils ton 100 67 - - - - - Jiangsu PTB Diesel oil US gal 1.51 1.02 - - - - - Shaanxi PTB Gasoline US gal 2.26 1.53 - - - - - Shaanxi PTB Truck, 8 ton (non-tipping) unit 38,000 25,700 - - - - - Sichuan PTB C46400/J89537/D1130/45 - 66 - 4.26 Much maintenance activity and the results of recent maintenance were observed throughout the areas visited by the mission. Pavement potholes were properly treated and patched, and drainage channels appeared to be regularly cleared. However, apparently because of the poor quality of materials and standards of construction, road riding surfaces were irregular and often very rough. It seems likely that the costs of maintaining roads (and a fortiori the costs of vehicle operation) could be reduced if pavements were constructed to higher standards initially. G. Road Traffic: Present and Future Trends Traffic Counting 4.27 Some road traffic counting was done during the 1950s but then lapsed. In 1979 a detailed and systematic system of traffic counting was introduced for all trunk roads, with 24-hour counts taking place 3 times per month throughout the year, including nonmotorized vehicles. Similar counts are also done for most provincial and some lower-class routes. This is proba- bly the most comprehensive road traffic information system anywhere in the world, although it should be possible through application of sampling proce- dures to reduce the effort without sacrificing quality; in fact, some of the effort might be more productive if transferred to origin-destination surveys, which are apparently not now done except in some large cities. Existing Traffic and Future Trends 4.28 Table 4.4 depicts total motor vehicle volumes on some major trunk routes that are now being proposed for upgrading; in addition, these routes also carry high volumes of slow-moving vehicles (agricultural tractors and trailers, hand carts) and pedestrians. 4.29 In recent years (since 1979) motor traffic on the trunk highways has grown at a very high overall average of 15% p.a., which is about the same rate of growth as the vehicle fleet, 14.5% p.a. This implies traffic volumes that double in less than five years. Traffic growth has been particularly rapid near the major cities where it averages 18-19% p.a., and in Sichuan Province passenger traffic is reported to have been growing at the extraordinary rate of nearly 24% p.a., although nationwide data indicate that the nonurban bus fleet has only been growing at 14.5%. In Jiangsu Province motor traffic (as distinct from vehicle numbers registered) has grown at only 8% p.a. since 1978. Jiangsu Province shares the nationwide characteristic that haulage on own-account (i.e. enterprise vehicles) has grown much more rapidly than public carrier service (about 4.5% p.a. in terms of vehicle fleet), although own-account vehicles do substantially fewer kilometers (and still fewer ton-kilometers) per annum than do public carrier vehicles. C46400/J89537/D1130/46 - 67 - Table 4.4: TRAFFIC VOLUMES ON SELECTED TRUNK HIGHWAYS (1979) Annual average daily traffic Route (motor vehicles only) /a Beijing-Tianjin-Tanggu 6,000 Nanjing-Hangzhou-Shanghai 4,000 Chengdu-Chongqing 3,000 Guangzhou-Shenzhen (Hong Kong) 4,000 Shenyang-Dalian 3,000 Wulumuqi (Urumqi)-Dushanzi 4,000 Jinan-Qingdao 3,000 /a In addition substantial volumes of slow-moving traffic and pedestrians are carried. Source: Ministry of Communications. 4.30 Congestion which is severe at times is already apparent on many roads, particularly around the cities and in the larger villages, despite the relatively low volumes of motor vehicles. This is due to the mixed nature of the traffic flow. Slow moving vehicles consume from five to ten times as much road capacity as fast-moving vehicles both because of their own slow speed and their hindrance to faster vehicles. Although quantitative evidence is lack- ing, informed opinion in China is that strictly local movements (formerly largely done by human motive power) are being increasingly mechanized. This releases labor from transport for use in agriculture proper. The transforma- tion is largely to small (12-HP) tiller-type tractors that draw trailers capable of carrying 500-1,000 kg at speeds of 10 kph, which does little to improve traffic flow characteristics. 4.31 With a continuation (let alone an increase) of the present high rates of traffic growth and roughly the same traffic composition, many seg- ments of the existing trunk network can be expected to be saturated within the next five years. Solutions of what will undoubtedly be a severe problem will require combinations of such measures as traffic separation through road widening; the addition of parallel, restricted-access links in high-volume C46400/J91841/DI130/47 - 68 - corridors; construction of bypasses around the cities, towns and villages; and substitution of more small (1/2-1 ton) pickup trucks for slow-moving tractor vehicle movements. The prospects for elimination of the multipurpose agricul- tural and transport tractor, however, appear limited in the short run, given their importance as prime movers in the fields. H. The Vehicle Fleet 4.32 Several features of the Chinese motor vehicle population are strik- ing. First, the extremely low number of passenger cars, roughly 1 car per 10,000 population or less than 1/10 that of India and 1/500 that of Brazil. Secondly, the almost total absence of trucks with more than 8 ton capacity. Thirdly, the very small number of light trucks in the 1/2-1 ton range. And finally, the seriously outmoded designs, together with the fact that the large majority of trucks are gasoline rather than diesel powered. 4.33 As shown in Table 4.5, China manufactured 185,700 vehicles (including cars) in 1979, while approximately 20,000 vehicles, or roughly 10%, were imported./_ 4.34 The 182,000 trucks (including jeeps) produced in 1979 make China about the tenth largest commercial vehicles producer in the world, ahead of Italy for example. If truck production continues at recent rates of growth, by 1985 or so, China would have an output comparable to that of Canada or the UK in 1975. Some 30 motor vehicle plants are reported to be in operation, but only four have any significant production capacity. The largest plant is Changchun No. 1 in the northeast (Jilin Province) and accounts for about one third of total production. It is an old plant built with Soviet aid and manufactures mainly the 4 or 4.5 ton Liberation trucks which are based on a Soviet model (which in turn was based on World War II vintage Ford trucks). The fuel efficiency of this vehicle is low, but it will operate on low octane fuel. Larger trucks (10-12 tons) have been produced with Czechoslovak aid and many Japanese, French and Romanian manufactured trucks are in circulation, but the makes of the two latter countries are declining in use since they were imported mostly in the early 1970s. /1 The difference between the total number of vehicles manufactured and imported (185,700 + 20,000 = 205,700) and the net addition to stock (197,000), or 8,700, would presumably constitute replacement of old vehicles. This replacement rate is low, but is consistent with the unusually long vehicle life (said to average 20 years) and the fact that the present fleet has been built up rapidly over recent years. C46400/J89537/D1115/43 - 69 - Table 4.5: MOTOR VEHICLES MANUFACTURED IN CHINA, 1979 Type Passenger cars 4,000 Jeeps & 2-ton trucks 25,000 Trucks - 2-1/2 tons 15,000 4 tons 60,000 5 tons 13,000 7 tons 500 8 tons 3,500 10 tons 300 15 tons 500 Subtotal by major plants 121,800 Subtotal in minor plants (including dumpers 3-1/2 - 100 ton) 63,900 Total . 185,700 Source: First Ministry of Machine Building, Motor Vehicles Bureau. C46400/J89537/D1130/49 - 70 - 4.35 It is striking that despite the proliferation of models (and con- comitant difficulties with spare parts) - 38 different models were locally manufactured and several other models were imported in 1979 - trucks neither larger than 8-ton nor smaller than 2-ton capacity are readily available. In 1979 only 300 10-ton trucks and 500 15-ton trucks were produced together with less than 300 dump trucks (including heavy dumpers up to 100 tons for mining operations). The information available indicates no trucks below 2-ton capacity are regularly manufactured in China. While a greater concentration on fewer models covering a wider range of choices would appear desirable, the introduction of heavier trucks would have to be synchronized with a pavement and bridge strengthening program to avoid rapid destruction of existing roads and bridges. Significant investment in the vehicle manufacturing sector would also be required. Since many of the economies of large size vehicles are based on savings of drivers' wages, a major cost element in high-wage economies but much less significant in China, it is likely that very large vehicles will play a smaller role in China, predominantly in specialized operations such as movement of oceangoing containers. I. Road Transport Services Organization 4.36 China's public carrier road freight haulage plays a smaller role and enterprises' own-account haulage a larger role than in other countries. Public carrier services have been completely monopolized until recently by the respective government transport bureaus at the national, provincial, regional, county and municipal levels; tariffs have been set at high levels and (at least in some provinces) substantial transshipment rather than door-to-door delivery has occurred when cargo crossed the jurisdictional boundaries of different bureaus./I 4.37 Faced with high tariffs and a sometimes poor service of public carrier vehicles, manufacturing or production enterprises have had strong incentives to purchase their own vehicle(s). The fleet of own-account vehicles as a result has grown very rapidly. Whereas, for example, public carriers (transport bureaus) owned 70% of the total vehicle fleet in 1949 and enterprises' own-account vehicles accounted for only 30%, by 1979 public carriers owned only 14% and enterprises 86% of the much larger fleet of vehicles. Nevertheless, public carriers still accounted for two thirds of the ton-km moved by truck. Own-account vehicles have been prevented from engaging in 'for-hire' activities. The result has been that many empty vehicle /1 Jiangsu Provincial Transport Bureau officials reported that trans- shipment has normally been avoided in that province and Sichuan Provincial Transport Bureau officials indicated that under the new economic policies, less of such transshipment is now occurring there. C46400/J91841/D1130/50 - 71 - kilometers were run which thus increased transport costs and fuel consumption, and took up valuable roadway space. It is reported, however, that many of these restrictive and wasteful practices are beginning to disappear under the effects of the new economic policies. This should ease some of the pressure on the industry. Road Transport Costs and Tariffs 4.38 Table 4.6 relates information available on road trucking costs and tariffs. Public carrier tariffs, which have been little revised since 1966, generally exceed costs by a wide margin; one transport bureau reported an overall surplus of 30% over costs in 1979. Compared to railway rates, truck- ing tariffs for haul distances under 50 km are approximately 6 times as great; for haulage distances of 50-100 km and over 100 km, trucking tariffs are 9-fold and 19-fold, respectively, of competing railway tariffs; in fact, at these rate differentials there is little truck public-carrier competition with railways. (However, railway short-haul tariffs do not cover costs, and it is understood a revision of railway tariffs is being planned to correct this anomaly.) J. Road Financing 4.39 During the 1950s road construction was financed mainly by the cen- tral government (approximately 3% of the total capital construction budget). Subsequently the burden of financing road construction was shifted largely to the provinces and lower levels of government. The roads share in the total capital construction budget dropped to 1.2% (1979), most of which came from the provincial and lower levels of government. Road maintenance has always been the responsibility of local governments. 4.40 A provincial road "maintenance" tax is the predominant source of revenues for both road construction and maintenance. The level of this ear- marked tax varies from province to province, but generally follows the common structure that public-carrier vehicles are taxed as a percentage typically 10-12.5% of their gross revenue turnover while enterprise (own account) vehicles are taxed at a fixed rate per capacity ton - typically Y 70-96 per ton per month. These rates amount to Y 3,360-4,608 or the equivalent of $2,270-3,114 per year for a 4-ton truck and twice that for an 8-ton truck. These are high as compared with the levels in many developing countries. No explicitly identified taxes appear to be levied on purchases of fuel, tires, parts or vehicles, although it is not clear what taxes may be implicitly incorporated in the prices of these goods. C46400/J89537/D1115/44 - 72 - Table 4.6: ROAD TRANSPORT FINANCIAL COSTS AND TARIFFS y $ Per freight ton-km: Cost 0.154 0.104 Tariff 0.18-0.19 over 25 km 0.12-0.13 0.23-2.00 under 25 km 0.16-1.35 Per passenger-km: Cost 0.149 Purchase price of fuel Gasoline 0.60 per liter 1.53 per US gal Diesel 0.40 per liter 1.02 per US gal Fuel consumption (fleetwide avg.)* Gasoline 0.0906 liter/capacity ton-km Diesel 0.0730 liter/capacity ton-km Purchase price of 8-ton vehicle * - Chinese manuf. 38,000 25,675 - Imported 55,000 37,162 Composition of Operating Costs Sichuan * Shanghai ** (%) (%) Fuel 28.9 22 Tires 9.7 7 Vehicle repairs 15.2 23 Vehicle depreciation 5.4 5 Labor 5.6 17 Road use taxes 15.6 7 Administration & misc. 15.6 19 100.0 100 Sources: * Sichuan Provincial Transport Bureau. ** Shanghai Transport Bureau. C46400/J91841/D1130/51 - 73 - 4.41 It was estimated that in 1979 provincial road maintenance tax revenues totalled Y 2,836 million, mostly used for improvement of existing roads, administration and maintenance. The expenditure pattern varies from one province to another, e.g. Sichuan was reported to spend 65% of revenues for maintenance and only 32% for reconstruction, whereas Jiangsu reported only 35% on maintenance and 53% on major reconstruction. In addition, the Government contributed Y 600 million for road investments, and contributions (largely in kind) from the counties and communes were Y 200-300 million for construction of 16,000 km of local roads. Capital Improvements Program 4.42 The stated priorities of the Highway Bureau are: (a) to upgrade certain key import-export and trunk routes as listed in Table 4.4; (b) to complete the network of trunk roads linking the provincial capitals and other major cities; (c) to improve the main approach roads to some 30 major cities; and (d) to provide and replace selected existing bridges and ferries. 4.43 In Sichuan Province, for example, the PTBs proposed road investment program is in the order of Y 225-270 million per year for the next 10 years, with approximately 28% being for improvements (mainly for approach roads to the main cities, but also rural access roads); 20% for construction of a new road linking Chengdu to Chongqing; 16% for road pavements; and 35% for bridge construction and replacement. However, financing is definitely identified for only about one third of this program, or Y 80 million per year - all but a small fraction coming from the provincial road maintenance tax, of which approximately 35% is used for new investments and improvements. K. Conclusions And Recommendations Problem Areas 4.44 Congestion and Capacity Constraints. Due to the mixed traffic of large numbers of slow-moving motor, animal and human drawn vehicles and of pedestrians and bicycles, journey speeds for trucks and buses are low and journey times quite high on almost all roads. Significant congestion, lasting over several hours of the day, is already evident on several main trunk routes (Table 4.4), on approach roads to some major cities and in the larger towns and villages. With the steady and rapid growth of motor traffic and continu- ing presence of slow-moving vehicles, road congestion will increase and spread over wider segments of the network for longer hours of the day. C46400/J91841/D1130/52 - 74 - 4.45 Under present operating conditions and practices, the routes with the heaviest traffic today are unlikely to be able to carry effectively the doubling of traffic envisaged by the mid-1980s. The nature of the road net- work and characteristics of the traffic are such that alternative routings to avoid congested segments are not easily available. A combination of many measures will be required to cope with and avert congestion, which may become a critical bottleneck as the economy seeks to expand its output of light manufactured and consumer goods while, at the same time, introducing greater specialization in manufacturing and in agriculture - tendencies which will require increasing reliance on road transport. A greater night-time use of the roads, more separation of slow-moving traffic, increased road widenings, the construction of more parallel routes and town bypasses will all be required to cope with the anticipated growth of traffic even if, as now, road transport continues to be limited to essentially short-haul functions. If road transport were to grow in China to perform the role it does in most industrialized and large developing economies, then a substantially larger program of road investments would be required. What, in fact, can be envisaged as the most appropriate answer to China's unique situation is a road system that in density and condition is somewhere in between what exists today and the more extensive systems of other countries. 4.46 Road Pavements. There are some 240,000 km of road with a mud-bound macadam surface with an extremely rough riding characteristic (often rougher than a natural gravel surface). Of these, there are some 80,000 km with traffic already in excess of 500 vehicles per day. Failure to blacktop these roads is causing vehicle operating costs (particularly tire wear, vehicle repairs and vehicle depreciation) far in excess of the costs of paving. 4.47 Of the 150,000 km (or 17% of the network) that are blacktopped, the vast majority are apparently of low strength and low riding quality. The reasons for this - primarily poor quality bitumens and poor quality control in construction - have been discussed above (para. 4.23). Whatever the ulti- mate remedy, it seems likely that major investments in road pavement streng- thening will be required in the near future as these light pavements can be expected to deteriorate quickly with rapidly increasing traffic. In a few cases it appeared that excessive maintenance efforts were already being made to preserve badly deteriorated pavements which should more economically be replaced. For China to take advantage of the economies offered by modern heavy trucks, still further expenditures to achieve substantially stronger pavements would be required. Although the potential benefits of larger vehicles are less in a low-wage economy, the marginal costs of strengthening to higher standard are quite low, and anticipated traffic growth very high, so that a systematic analysis of the benefits and costs of introducing heavier vehicles is needed. However, it seems likely that somewhat higher standard pavements would be a wise investment in any case. C46400/J89537/D1130/53 - 75 - 4.48 Bridges. The majority of bridges in China have load restrictions of less than 15 tons, with many being restricted to less than 10 tons; in addi- tion, there are many tens of thousands of meters of bridges which are offi- cially classified as dangerous. The introduction of much heavier vehicles would require substantial investments in bridges, but since many existing bridges must be replaced - and many more are yet to be built as the road network is developed - and considering that the marginal costs of constructing a bridge to much higher strength is very small, it would seem desirable that bridge standards (just as pavement standards) should be upgraded in China. 4.49 Access to Remote Areas. Many millions of people still are not connected to the road network, particularly in the mountainous regions. It is not clear what the purely economic return from investments to establish such connections would be. These would need examining case by case. The benefits, however, are likely to be considerable for at least some parts of such vast areas, particularly if a heavy social weight is attached by Chinese society to improved access to educational and health facilities as well as market access and administrative integration. The regions and peoples affected, though a relatively small proportion of the Chinese nation, nonetheless exceed by wide margins the total populations and land areas of many independent nations in the world. Their needs and potentials should not be lost from sight when put in percentage terms. 4.50 Vehicle Design, Fleet Capacity and Utilization. The design of both Chinese-manufactured and many imported vehicles is outmoded. There is a pro- liferation of models and of the spare parts required, but as yet a restricted choice in the size of vehicles (most notably the absence of small utility trucks and vehicles larger than 8 tons). The result is that vehicle operating costs, including excessive fuel consumption, are higher than they need be and costly custom manufacture is necessary to provide needed spare parts. 4.51 Due to many factors, including the high tariffs of public carriers and the underpricing of capital, there is currently excess capacity in the trucking fleet. Transport by public carriers has grown much more slowly than own-account haulage. The vehicle fleet, particularly own-account trucks, has increased dramatically, in fact more rapidly than traffic volume. Own-account vehicles now account for approximately 85% of the motor vehicle fleet, yet reportedly carry only one third of total truck tonnage. With the relaxation of restrictions on own-account vehicles to offer for-hire services, it is to be anticipated that there will be strong pressure on the revenues of the public carriers as competition drives down the high price of road haulage. This should promote a more effective utilization of the vehicle fleet, and reduce the incentives for many enterprises to own vehicles. It should also reduce by a considerable amount the empty running of vehicles, thereby reducing vehicle operating costs, including fuel consumption, and the congestion of road space. C46400/J89537/D1130/54 - 76 - 4.52 Intermodal Allocation. The average haul distances on China's roads are extremely low; in Sichuan Province the average load of public carriers is 59.5 km and Jiangsu Province about 40 km. While the role of trucking in long-distance transport in China is likely to remain limited, it is evident that the railways are now carrying much short-haul traffic that could better be moved by road transport. The proposed revision of railway rates so that its tariffs at least cover the costs of short-haul movements is likely to encourage some rationalization of modal split along more economic patterns. A shift of only 10% of railway traffic (or roughly one third of that moving less than 100 km) would constitute more than a doubling of motor traffic on the highway system. This would require substantial investments to expand capacity of the road infrastructure, but not (at least not initially) the vehicle fleet, assuming that more effective utilization of own-account vehicles is encouraged. 4.53 Planning and Information Systems. The present highway management information system is only gradually being established. The preparation of a systematic and comprehensive program, based on information and data obtained through investigation, is still at an early stage. Evaluation of investment priorities has so far not been based on systematic and comparative analysis. The central government is not fully aware of many of the financial sources of local road construction projects. 4.54 Training, Design and Research. The highway engineering profession has not developed in China to the same degree as other professions and was also heavily affected by the turbulence of the Cultural Revolution. While the geometric design for the types of roads now being constructed in China appears, in most respects, to be satisfactory, pavement and bridge designs and materials could be substantially improved by the introduction and adaptation to local conditions of established designs, materials and procedures from other countries; this could be done effectively in the context of a small- scale program of applied research to ensure the most appropriate forms of local adaptation. 4.55 Improvement of quality control in construction, particularly in pavements, is badly needed; this must be addressed in the first instance by an expanded and strengthened educational program to train engineers and technicians. 4.56 Achievement of all of these objectives will require much greater numbers of trained personnel at the professional, technical and vocational levels. The one training institute visited, aimed at the professional level, appeared ill equipped in terms of libraries (particularly foreign professional literature), laboratories, equipment and other training and research facilities. A greatly expanded program of highway planning and engineering training at all levels seems essential. The process could be quickened and enriched at the professional level by the -reciprocal exchange of faculty members with foreign universities and consulting firms. C46400/J89537/D1130/55 - 77 - A Strategy for Roads Development in China 4.57 Prognosis. Many of the major forces and factors that have led to the rapid development of modern highways and road transport in other countries - e.g. cheap energy supplies, high and fast rising disposable incomes which generated high levels of private motorization and abundant capital for construction of roads and purchase of vehicles - are absent in China today. Moreover, the large numbers of slow-moving vehicles and pedestrians impede traffic flow on the existing highway system, thus increasing vehicle operating costs and road investment requirements, making road transport a relatively more costly mode. At the same time, there has also been a clear policy preference in China of priority to the railway so that it could meet the long-haul transport needs of heavy industry. The Chinese railway is an effective carrier that offers an efficient means for large, long-haul transport movements within the limited corridors of its established trunk network. 4.58 The role of road transport in China may thus be expected to evolve differently from that of other countries. The demands for, and financial support of, high standard highways will be less because of the absence of the private motorist. Road transport competition with railways will be less for long-haul traffic than in other countries, in part because of weaknesses of the road system and in part, particularly in the near future, vehicle limitations. A planned, coordinated development of road transport should be aimed at complementing rather than replacing rail services, taking into account the real comparative advantages and costs of each mode. 4.59 Nevertheless, even allowing for the special circumstances of China the role of road transport in the future should be substantially greater than it is today. Even under past policies traffic flow on the highways has grown rapidly. Changes in the structure and special distribution of economic activities, brought about by the new economic policies and opportunities for enterprise initiative, are likely to generate traffic in consumer goods, light manufactures, manufactured components, and foodstuffs that are best suited to road transport in terms of their normal shipment patterns, size, handling requirements, etc. Also, some amounts of existing short-haul traffic on the railway are likely to be shifted to road transport when both rail and road tariffs are adjusted to reflect costs. 4.60 Significant sections of the existing road network will be unable to handle the increased volumes of traffic that may reasonably be expected to develop and, therefore, will require some major new investments. The alter- native solution of expanding railway or waterway capacity may be far more costly in individual cases. Large investments in strengthening existing roads and bridges are also likely to be necessary. In the effort to extend the road network as quickly as possible, light designs were adopted and these were not always well constructed. With the rapid growth of traffic and the aging of large segments of the network, substantial investment losses can be expected unless pavements are strengthened soon. C46400/J89537/D1130/56 - 78 - 4.61 Recommended Actions. Since the resources available are unlikely to meet even the most urgent and pressing demands - for investments to increase capacities in the major corridors, to link remote areas, to repair, resurface, rehabilitate, strengthen and maintain existing roads - planning procedures must be strengthened to permit a careful determination of overall priorities in the highway sector. The proposal to develop a capability for highway project feasibility studies at the three central government survey and design institutes is a useful first step. Highway project planning and investment analysis cannot, however, operate in isolation from broader analysis of transport sector priorities. 4.62 A number of major issues in transport and highway planning require resolution which can be done only after careful examination. Planning or applied research studies are recommended, therefore, in the following areas: (a) demand forecasting, including competing road and rail traffic; (b) costs and service characteristics of road transport (for input to multimodal comparative studies); (c) road transport pricing, user charges and financing mechanisms (to determine economically efficient tariffs and sources of road finance); (d) optimum road vehicle size and weights (balancing the costs of infrastructure against the benefits of larger vehicles); (e) the roads construction materials problem (including the possible large-scale use of coal tars); and (f) cost interrelationships among highway construction, maintenance and vehicle operating costs (to provide an empirical scientific basis for optimizing road design and maintenance standards). Appendix C provides a tentative assessment of the priority and resource requirements of these various studies. With the exception of the sixth, and possibly the fifth topic, very useful first studies could probably be completed after only a few man-months of investigation in each case. In the case of the sixth topic, highway cost interrelationships, the results of major studies in Brazil and India to be completed in 1982 should yield results which can partly be transferred to China. Further research would most appropriately be planned after a review of those studies. C46400/J89537/D1130/57 - 79 - 5. WATERBORNE TRANSPORT A. General Introduction 5.01 This section deals with ports, inland waterways and coastal and ocean shipping. After a general introduction to water transport as a whole, including broad issues, the various subsectors are presented in turn, each with a brief description followed by a more analytical or issuesoriented part. 5.02 Water transport is more important in China than in most countries. Historically, it provided the major means for goods transport. Inland naviga- tion canals, including the Grand Canal connecting Beijing with Hangzhou, were started well over 2000 years ago. Presently, the length of navigable waterways, with a usual depth of at least 1.0 m, is 57,000 km, or about the same as the length of China's rail network. China's coastline is 18,000 km long. 5.03 Despite their historical significance, waterways somewhat fell into disuse with the advent of rail transport. In 1952, only 14 million tons reportedly moved on inland and coastal waterways, about one tenth of the ton- nage moved by rail in that year. Even with ocean shipping in Chinese vessels included, freight carried totalled only 15 billion ton-km in 1952 and 42 bil- lion km in 1957. In recent years, however, water transport has increased in relative importance and has remained the second most important mode in China. In 1979, nearly 400 million tons (on modern vessels) moved on domestic waters (Table 5.1), a 28-fold growth from 1952. The freight volume of inland and coastal shipping, 139 million ton-km in 1979, was roughly one quarter of the railways- freight volume. Ocean shipping carried in Chinese vessels grew spectacularly to over 317 billion ton-km, based on an average freight haul of nearly 7,500 km (vs. 1,232 km in coastal and 170 km in inland shipping). This water transport volume grew at about 23% p.a. in 1952-57 and 8.3% p.a. in 1952-79. Together with traffic growth, there has been a large technolo- gical change in water transport. Before 1950, 70% of all goods carried by water (inland and coastal) were moved by junks with only 30% carried by powered vessels. In 1979 junks carried less than 8% of the goods and produced less than 3% of the ton-km (including ocean shipping). C46400/J89537/D1606/04 - 80 - Table 5.1: TOTAL WATER TRANSPORT VOLUME 1975 1976 1977 1978 1979 Tons (million) Inland - - - 327.6 321.2 Coastal - - - 68.7 68.6 Shanghai 30.9 33.4 36.6 38.3 36.4 Guangzhou 6.3 6.3 9.3 11.5 13.4 Others - - - 18.9 18.8 Ocean shipping - - - 36.6 42.5 Total 349.9 355.3 388.6 432.9 432.3 Ton-km (million) Inland - - - 51,338 54,535 Coastal - - - 77,903 84,502 Shanghai 30,728 34,182 38,063 41,657 44,285 Guangzhou 8,206 9,741 16,842 29,952 33,636 Others - - - 6,292 6,581 Ocean shipping - - - 248,675 317,383 Total 257,467 246,714 276,170 377,916 456,420 Average Distance (km) Inland - - - 157 170 Coastal - - - 1,134 1,232 Shanghai 994 1,023 1,011 1,087 1,217 Guangzhou 1,303 1,546 1,813 2,609 2,511 Others - - - 491 350 Ocean shipping - - - 6,795 7,469 Total 736 694 714 873 1,056 Source: Ministry of Communications. C46400/J89537/D1606/05 - 81 - 5.04 China's ocean merchant marine has also grown at a phenomenal rate over the past years. China is estimated to have committed over $1.0 billion on ship acquisition between the middle of 1975 and 1979, and an additional $0.3 billion for purchase of second-hand and newly-built vessels by the end of 1980. The total capacity of the Chinese-controlled oceangoing merchant fleet has grown from 1.67 million dwt at the beginning of 1973 to 7.04 million dwt at the end of 1979, or a compound growth rate of over 32% p.a. The growth is continuing unabated with emphasis now being placed not only on tonnage or capacity but also on improvements in technology. 5.05 This rapid growth in water transport, both domestic and overseas, has put a corresponding burden on Chinese ports. In 1979, cargo handled at the 15 larger ports controlled by the MOC reached 212.6 million tons of which only one third was foreign trade cargoes. Port traffic grew at 14.2% p.a. between 1976 and 1979. It is reported that between 1973 and 1979, 40 new deepwater berths capable of handling ships over 10,000 dwt were completed, and that another 50 are presently under construction. Major ports are also being modernized to handle containers as well as large amounts of bulk commodities. Institutions, Organization, and Management 5.06 At the national level, water transport comes, together with roads, under the jurisdiction of the MOC, except for a major segment of the commer- cial shipbuilding capacity which is under the Sixth Ministry of Machine Building. The national level jurisdiction of MOC covers in fact only the 15 larger ports, coastal shipping under two regional bureaus at Shanghai and Guangzhou, inland navigation on the main course of the Chang Jiang and ocean shipping. All other ports and shipping activities, and in particular all other inland waterways, are under the control of provincial or municipal agencies as well as enterprises. 5.07 The organizational structure of the MOC consists of various water transport and highways departments, each of which oversees a hierarchy of external bureaus, divisions, corporations, and enterprises. These usually have a considerable degree of operating autonomy. The ministerial departments are largely engaged in medium- to long-range planning, including the review of the short-term plans submitted by external agencies, the setting of policy (both operating and investment), and the review of operations. 5.08 The major departments involved in water transport operations are: (a) the Water Transport Department dealing with coastal shipping, Chang Jiang Shipping Authority (CSA) and Harbor Bureaus (or ports); and C46400/J89537/D1606/06 - 82 - (b) the Ocean Shipping Department dealing with the China Ocean Shipping Corporation (COSCO) and Ocean Shipping Agency services. In addition there are various departments concerned with planning, design, and construction of facilities, vessels, and equipment. Among these are: (a) the Planning Department dealing with medium- to long-range planning, review of performance, statistical and data services; (b) the Industry Department dealing with shipyards (except those owned and operated by enterprises) and equipment factories; and (c) the Capital Construction Bureau, which is in charge of engineering design and appraisal, and supervision of construction. Finally, there are several departments responsible for inspection, control, and operational supervision such as: (a) the Salvage Department; and (b) the Port Department serving as Harbor Master and Coast Guard and responsible for environmental control. Dredging 5.09 Because many major Chinese ports are estuarial, annual maintenance dredging needs are large. The rapid development of ports in the last few years has also created needs for much capital dredging. To carry out these programs, China has recently equipped itself with a large and technologically advanced fleet of dredgers. The responsibility for dredging belongs mainly to the MOC, although the Ministry of Water Conservancy has some dredging capabi- lity. The limited information available covers only dredging under the MOC. 5.10 The MOC established, in early 1980, a new state corporation, the China Harbor Engineering Company to design and execute port construction and dredging activities in China and abroad. This company operates a fleet of 500 dredgers and auxiliary vessels, including some of the most modern dredgers in the world. Their dredging design capacity is more than 100 million cu m p.a. and in 1979 they performed 80 million cu m. The staff includes 33,000 technical workers and 3,000 engineers. They are deployed under four construction corporations and four dredging corporations at Tianjin, Shanghai, Guangzhou, and Wuhan, and one design and consultant corporation in Beijing. C46400/J89537/D1606/07 - 83 - General Problems in Water Transport 5.11 Planning and Coordination. While the water transport system in China is impressive and plays a major role in the sector, there appears to be no effective plan for its systematic operation or development. Coordination of planning among various agencies also appears to be inadequate. 5.12 Coordination among ministries, commissions, provinces, municipali- ties, and even among departments of one ministry needs improvement, as many administrative units appear to be unaware of development taking place in other units which would affect their own operations or effectiveness. The above issue results from the lack of an effective overall maritime (port and shipping) plan. 5.13 The separation of ocean, coastal, and inland water transport into institutionally and administratively separate units results in unnecessary transshipment. For the same reason, consignment size is sometimes less than the technical and economical optimum. Due to jurisdictional (assigned task) requirements, carriers are prevented from offering the most direct service, such as direct coastal port to inland port (or enterprise terminal) or foreign port to coastal or inland port shipping without intermediate transshipment at a major ocean port or coastal port. Potential savings could be achieved through: (a) reduction of port congestion; (b) reduction of port investments; (c) improvement in ship/barge utilization; (d) reduction in transport costs even using present tariff structure; and (e) reduction in ship/barge requirements. 5.14 Tariffs. Although water transport costs are only about 65% of rail costs per ton-km, the price structure gives freight movements by rail a 20-30% advantage. Considering the limitations in rail capacity and the long lead time of large investments needed to expand it, greater emphasis could be given to water transport by (a) increasing its capacity which can be done fairly rapidly, and (b) pricing domestic water transport more in line with its costs. This is particularly true now with escalating fuel costs and potential petroleum shortages. To move the average ton-km, coastal and inland water modes consume only about 30% as much energy as rail transport. It would seem that for instance some of the coal presently moved by rail on north-south routes could shift to parallel coastal shipping routes or the Grand Canal. C46400/J89537/D1606/08 - 84 - 5.15 Dredging. The dredging capacity mentioned in paras. 5.09 and 5.10 above is deployed on a rigid basis by assigning certain dredgers to given ports with the assigned task of maintaining traditional channels at a certain depth. The optimization of dredger allocations from a technological and economic point of view should be strengthened. Furthermore, surveys and studies of sediment transport as a guide for improving dredging works should be expanded. 5.16 Hydraulic Study Capacity. There are several hydraulic laboratories in China, the most important being the Hydraulic Research Institute of Nanjing, which has several large test basins and tanks. There are smaller laboratories in Tianjin, Dalian, Shanghai and Guangzhou. Staff at the Nanjing Institute, which works largely on the Chang Jiang estuarial and flood control problems, is theoretically competent. The main problem is the lack of effective modern survey instrumentation for field data acquisition and modern laboratory instrumentation and equipment. As a result, both the scope and accuracy of hydraulic research has been quite limited considering the vast coastal, estuarial, and inland water (irrigation, drainage, flood control, etc.) hydraulic problems of China. The development of an effective large-scale hydraulic survey and study capability by the introduction of equipment and instrumentation, supplemented by some training in modern measurement, test and analysis techniques, should receive high priority. B. Ports Traffic 5.17 Ocean ports in China are divided into nationally controlled (MOC) ports and provincial or municipal ports. Only MOC controlled ports are discussed in this report. They number 15, and a summary of their principal characteristics is given in Appendix D. The total amount of cargo handled by these major ports in 1979 was 212.6 million tons, of which Shanghai alone handled 83.5 million tons or nearly 39%. The three principal bulk cargo ports - Dalian, Qinhuangdao and Qingdao - together account for another 73.6 million tons or about 35% of total port throughput. Of the remaining 11 ports, Tianjin, Huangpu, and Zhanjiang account for about 17%, while the remaining 8 minor ports handle only about 9% of the total throughput. 5.18 The growth of port traffic through the 15 MOC ports is summarized in Table 5.2. The rapid growth in port throughput in the 1976-79 period reflects the economic opening of China to foreign trade. An average annual growth of about 14.3% has been sustained during this period. The largest growth is in foreign trade, where imports more than doubled in four years while exports C46400/J89795/D1606/09 - 85 - increased by 83%. Domestic or coastal traffic also increased significantly during the period, with landings increasing by a factor of 1.37 and loadings by a factor of 1.26 between 1976 and 1979. In 1979 coastal traffic accounted for two thirds of the throughput of the 15 major ports under MOC. Table 5.2: VOLUME OF COMMODITIES HANDLED BY MOC PORTS, 1975-79 (million tons) 1975 1976 1977 1978 1979 Imports 19.76 18.58 24.81 37.61 42.64 Exports 18.37 15.35 15.83 18.80 28.09 Coastal shipping - in 47.69 48.23 52.04 62.72 66.25 Coastal shipping - out 57.76 59.81 67.01 79.21 75.59 Total Cargo Handled 143.58 141.97 159.69 198.34 212.57 Note: The difference between coastal shipping in and out is due to some traffic originating or terminating at non-MOC ports. Source: Minstry of Communications. Infrastructure 5.19 This growth of traffic has been greatest at the seven major ports of Dalian, Tianjin, Qinhuangdao, Qingdao, Shanghai, Huangpu and Zhanjiang. Recent port improvements have been largely concentrated at these ports but they remain congested. During 1979, for example, ships waited for berths at the ports of Shanghai, Tianjin and Huangpu an average of 30% of their total stop over time or between 2 and 4 days. The major effort to modernize ports started in the early 1970s continues with particular emphasis given now to container terminals in Tianjin, Shanghai and Huangpu (new harbor); and coal terminals at Qinhuangdao, Qingdao and Huangpu. The new coal loading facili- ties at Qinhuangdao are planned to receive ships up to 50,000 dwt while those at Huangpu are designed for ships up to 30,000 dwt. Expansion of facilities is also taking place at smaller ports such as Lianyungang for dry bulk and C46400/J89795/D1606/10 - 86 - coal. Currently coal is exported mainly through Qinhuangdao and Lianyungang, with respective annual throughput of 10 million and 2.5 million tons of coal. Oil exports go through Dalian, Qinhuangdao, and Qingdao. Dalian and Qinhuangdao are both linked by pipeline to the Daqing field which supplies about half of China-s production. Information on the 15 MOC ports is given in Appendix E. Institutions, Organization and Management 5.20 As mentioned above, the 15 major ports are under the control of the MOC. Each port is managed by a Harbor Bureau, with the Shanghai Harbor Bureau assuming special status because of its importance. Its director had Vice Ministerial rank in the past. The Harbor Bureaus have a Director, various Deputy Directors, Department and Division heads. The management of a port operates as an enterprise and is fully responsible for day-to-day operations. The security of each port, as well as specifications for navigational aids, environmental control and standards of ship operation in the approaches to and within the port, is the responsibility of the Harbor Master, who reports to the Department of Harbor Supervisors in the MOC. This department performs a function similar to that of the US Coast Guard, including ship traffic control, with the exception of maneuvering and berth assignment in port, which are under the control of the traffic department of the respective harbor bureaus. Operations 5.21 Ports are operated as autonomous, independent enterprises in the performance of their assigned task under the requirements of their approved operating and investment budget and plan. Each port, depending on its size, has a full range of operating departments including planning, engineering, traffic, training, commercial, general administrative, accounting, etc. In larger ports the subdivisions of departments may be greater. Similarly, larger ports may run their facilities under several different divisions or areas, each of which may have many of the departments existing at the Harbor Bureau level. Each division or area would normally run as a cost and revenue or budget center. Other nondivisional or area specific units such as repair of ships, hospitals, etc. would similarly constitute cost/profit centers. Workers are usually assigned to a department, operational division, or other cost center on a permanent basis. The throughput per berth is generally above the world average of 150,000 tons of general cargo. C46400/J89537/D1606/11 - 87 - 5.22 Ship traffic is assigned to individual ports. Rail traffic within the port is controlled by the railways in some but not all ports. This is a major disadvantage, as effective port operations and utilization require independent control. With the predominance of general cargo and bulk cargo traffic allocated to a very small number of limited-draft ports, severe congestion exists at the berths onshore, and at the land approaches to the seven major ports. Major Port Problems and Recommendations 5.23 Transshipment. As already mentioned a proportion of cargoes moving through congested ports such as Shanghai and Huangpu is unnecessary tranship- ment cargo arriving by waterborne transport and reloaded at the port onto other waterborne transport. More attention should be given to direct delivery and use of vessels which can be utilized both for coastal (or feeder) and inland water transport. In particular the use of oceangoing water barges should be investigated. 5.24 Liaison with Hinterland. A major proportion of the rapidly growing traffic at the ports of Tianjin, Shanghai and Huangpu is not destined for, or arriving from, the immediate hinterland of these ports; rather, it is going to and coming from places that could be effectively served by rail, coastal or inland water connections from other national or provincial ports. Many of these minor ports have equal or better depth than these three ports, are less congested, and may offer more economical opportunities for expansion. The expansion plans for the major ports, and in particular for the ports of Tianjin, Shanghai and Huangpu, appear to have been developed on the basis of individual port requirements rather than on the basis of a national port and port traffic flow development plan, in which the most economic and effective global port development program is generated by minimizing total transport and investment costs, with due regard to expansion opportunities and the needs of changing technology. 5.25 Port Dredging. Besides the general remarks made about dredging in para. 5.15 above, it appears that, in general, capital and maintenance dredg- ing of ports and their approaches is excessive. This may be greatly improved through the use of formal hydraulic (physical and mathematical) model studies based on updated surveys. Alternate (self-scouring) channel alignments and the use of offshore terminals may similarly offer opportunities for major savings in dredging costs and increased operating depth at terminals. It also appears that some of the lesser ports, as well as some new locations, may offer more economic port development sites than expansion of existing port facilities. Worldwide, the trend has been to move all the estuarial ports to coastal locations to facilitate access of larger ships while at the same time curtailing dredging expenditures. C46400/J89537/D1606/12 - 88 - 5.26 Operations. In the four ports visited, a large percentage of the time a ship spent at berth was lost due to nonship related factors such as unavailability of equipment, documentation and cargo. These losses of productive berth time are much larger than in many ports of other countries. Together with ship waiting time for berths, it results in vessels spending only 30-48% of their port turnaround time productively. For instance, in 1979 at Huangpu, out of an average time in port of 9.7 days per vessel, 2.9 days were spent waiting for a berth and another 2.1 days waiting unproductively at a berth. For foreign ships the figures were respectively 13.7, 5.2 and 2.8 days. Reduction of lost time at berth would result in substantial benefits. 5.27 Access to all the major ports is depth restricted. The ports of Huangpu, Shanghai, and Tianjin, for example, all have a limiting depth of 8.5 meters at low water; only a few berths have alongside depths of 12 meters, allowing some deeper draft vessels to enter and exit during high water. There are some port sites (Qingdao, downriver Chang Jiang, Ningbo, etc.) which may offer better opportunities than the deepening of channels planned for the major existing ports. Surveys of all existing and potential site approaches and subsequent analysis are essential. 5.28 Planning and development of container technology has so far been limited to the ports with little attention given to transport and storage of containers inland. Container operations can only be technically and economically successful if an integrated, intermodal systems approach is planned and implemented. 5.29 There appears to be little integral scheduling of vessels to coordi- nate their arrival with berth and cargo availability. It is much more effi- cient to slow steam than arrive at full speed and then wait 4 to 6 days. Many ports now practice dynamic queueing, whereby ships are assigned times and facilities as much as one week before their expected arrival time. 5.30 Infrastructure and Equipment. While the general quality of port engineering and construction appears good, there is a lack of: (a) modern engineering approaches; (b) survey information and analysis; (c) effective independent testing, supervision, and control of design and construction (or manufacture); and (d) sufficiently skilled, experienced and specialized professionals. C46400/J89537/D1606/13 - 89 - 5.31 China has attempted to independently develop much of its technology, particularly in fields such as heavy machinery, materials handling equipment, etc. This has not always been easy nor immediately successful as shown by the two container ship gantries in Shanghai port, which although erected over 14 months ago have not yet been put into service. In general there appears to be a lack of effective understanding of the role and the method for introducing modern integrated physical, operational, and managerial controls. As more modern equipment is introduced, China will require significant training and assistance in integrated system controls, including computer or special purpose data handling devices. 5.32 Telecommunications, Navigational Aids, and Management Information. There is an urgent need to improve inter- and intra-ship and port (domestic and foreign) communications. Many of the delays in port are caused by the lack of timely information, such as manifests, cargo plans, and other docu- ments, including even ship or cargo characteristics. Furthermore, data on traffic, operations and port conditions vary considerably among ports and even among sections of the same port. There is an urgent need for uniform specifi- cation of cargo and other data, as well as for the collection, aggregation, storage, retrieval, and analysis of information to permit improved management and decision making at all levels. 5.33 Tariffs and Costs. Tariffs for various port services such as wharfage, tonnage, storage, etc. are generally lower than comparable charges at Hong Kong or Singapore. However, in addition to such port charges, foreign ships are charged an ad valorem tax of 3%, which makes their port costs substantially higher. Storage charges do not increase with storage time, and there are no penalty charges for any services such as unproductive berth time. While the four ports visited report average surpluses of nearly 50% of gross revenues, it is difficult to ascertain whether existing tariffs fully cover costs. In particular, the depreciation rate is only 3% of the original cost of assets and there is no charge for interest on capital. C. Inland Water Shipping General 5.34 Inland water transport is a widely dispersed industry in China. Of the 107,800 km of waterways in service in 1979 only about 3,000 km on the main course of the Chang Jiang were under direct control of the MOC. More than 320 million tons of cargo were transported on inland waterways in 1979 over an average distance of 170 km (Table 5.1). Only 46 million tons or 14% of that cargo was carried by the Chang Jiang Shipping Authority (CSA) under the MOC. C46400/J89537/D1606/14 - 90 - The average distance of cargo carried by CSA exceeds 560 km, which means that other inland water transport goods moved only about 100 km on average. The Chang Jiang and its tributaries comprise the most active inland water system with over 230 million tons of cargo moved, or 72% of the total inland water tonnage. Some further details on the CSA are given in Appendix D. The remaining 91 million tons of inland water cargo move on the Zhu Jiang (Pearl River) system, the navigable parts of the Heilongjiang River system, the Grand Canal, and a myriad of smaller waterways. 5.35 Many enterprises and communes rely solely on inland waterways for goods transport and are served by small enterprise- or commune-owned and operated barges and lighters. Most of these enterprises and communes also have their own terminals and terminal equipment. As a result, waterways often have three or four levels or types of terminals - those owned and operated by CSA, by a provincial agency, by a municipal or county agency and finally by an enterprise or a commune. This obviously leads to a large degree of fragmen- tation and often duplication. Although MOC-controlled vessels usually use MOC-owned and controlled terminals, provincial or municipal agency or enter- prise controlled vessels use all types of terminals. Technology 5.36 The role of traditional junks and small manpowered boats or barges is still significant on tributaries of major rivers and the myriad of small waterways, which in general serve the triple purpose of navigation, irriga- tion, and drainage or flood control. On the larger waterways, most tradi- tional junks have now been displaced by modern self-propelled vessels and pushed or towed barges. Specialized barges of up to 5,000 dwt deadweight for general cargo, dry bulk, or liquid bulk are operating on the Chang Jiang and the Zhu Jiang; they are often propelled in barge trains of 2-12 barges, push- towed by a powerful 2,640 SHP towboat. Most barges on the upper Chang Jiang, the Zhu Jiang, and major tributaries are 500-1,000 dwt capacity, while on the lower Chang Jiang they go up to 2,000 and 3,000 dwt. New covered 2,000 dwt (grain) barges were recently acquired from Dravo (USA). These are now under construction in CSA shipyards under a technical assistance agreement with Dravo. About 6,000 SHP push boats are being constructed in the USA for the Chinese authorities. 5.37 A major problem and challenge is the design and operation of upriver and tributary terminals, because of the large variation in water level and the frequent need for levees to protect the surrounding countryside from high water flooding. With seasonal water levels varying up to several tens of meters at some major river ports, many terminals are restricted to the use of floating piers served by floating cranes and the use of rope or cable ways, sliding ramps, and floating ramps for the docking of vessels and vessel-to- shore cargo transfer. This makes terminal operations difficult, slow, and C46400/J89537/Dl606/15 - 91 - expensive. Some fixed docking and loading facilities, particularly for bulk commodities such as.coal, have been instal-led as far upriver as Wuhan on the Chang Jiang, but chese types of terminals are still the exception. Tariffs 5.38 Tariffs for .MOC-controlled inland water transport on the Chang Jiang vary with distance. Rates on the upper reaches of the river above Wuhan are higher than those on the lower reaches between Wuhan and 'Janjing/Shanghai. Rates are authorized by the State Pricing Bureau and are generally lower than comparable rates charged on tributaries by provincial, county, municipal or enterprise vessels. However, no information was available on how tariffs or rates are determined for service by non-MOC vessels involving waterways under the jurisdiction of several provinces or of provinces and the MOC. Problems and Recommendations 5.39 Institutional. Without more information on non-MOC operations at the provincial and lower levels, it is difficult to determine if the need for additional vessels and facilities indicated by the CSA should be met by new acquisitions or the reallocation of apparently underutilized vessel and terminal capacity controlled Sy other agencies or enterprises. 5.40 A large percentage of cargo moving through major inland water terminals appears to be transshipment cargo transferred from main vessels (usually MOC-controlled) to vessels controlled by other agencies or enter- prises serving main and/or tributary river routes. 5.41 While it is recognized that many enterprises require their own terminal for effective operations, population centers such as cities and towns would be better served by a limited number of larger terminals which would provide for effective storage and distribution rather than by the current proliferation of small inadequate terminals. The average terminal handling rate for break bulk cargo, for example, and the resulting vessel turnaround time are now poor. 5.42 Channels. The main river navigational channels are well maintained and marked. This is not the case for tributary rivers, largely because provincial, municipal, or other authorities do not usually have sufficient funds to develop and maintain the navigational channels. 5.43 Tariffs. The differential tariff on main and tributary river routes results in different levels of service. Also linear tariffs without volume discounts encourage movements of large numbers of small lot sizes over C46400/J89537/D1606/16 - 92 - comparatively short distauces. As mentioned above -ross-subsidies are apparent Detween the upper and lo;er reaches of the Chan,g Jiang; these interregional subsidies appear similar to the railway subsidies (para. 3.41). D. Coastal Shipping General 5.44 Coastal shipping is an important segment of the Chinese transport industry. It handled nearly 69 million tons of cargo in 1979, of which 50 million tons were carried by vessels of the two MOC-operated coastal shipping transport bureaus, and 19 million tons by vessels (including junks) operated by various provincial enterprises (Table 5.1). The 1979 traffic handled by vessels under '-OC was the same as in 1978. The average distance of carriage is around 1,200 km. Coal comprises more than 31%, and crude oil 39% of the total cargo carried by coastal shipping under the MOC. The remainder consists largely of mineral ore, petroleum products, cement, fertilizer, and grain. Little general cargo is transported by coastal shipping. Institutions 5.45 The MOC controls the two coastal shipping ogerating comoanies: the Shanghai and the Guangzhou W4ater Transport Bureaus. At the MfOC level, the divisions of the Water Transport Department are responsible for planning, budgeting, and overall control of the coastal transportation companies. Detailed scheduling, vessel assignment, cargo booking, vessel husbandry, manning suggly, and other vessel operating management functions are performed by the individual coastal shipoing transport companies. Traffic 5.46 Information on coastal traffic is scant. Transport figures for traffic not under the two bureaus of Shanghai and Guangzhou are available for 1978 and 1979 only. Ton-km for the two bureaus are given below for the 1975-79 period. 1975 1976 1977 1978 1979 -----------(million ton-km)------------- Shanghai 30,232 30,500 32,017 35,292 34,264 Guangzhou 21,176 20,759 22,944 37,549 35,477 C46400/J91841/D1606/17 - 93 - While the Shanghai Bureau's traffic has increased by 13% between 1975 and 1979, 'that"'of the Guangzhou Bureau grew by nearly 70%. This is probably due in part to the resumption of shipping through the Taiwan straits, which was previously almost nonexistent. This is corroborated by the fact that the average distance of shipping by the Guangzhou Water Transport Bureau has almost doubled since 1976 and is now over twice that of the Shanghai Bureau. There is also a significant amount of passenger traffic: about 4 million passengers were carried on coastal routes in 1979. Problems 5.47 The information available on coastal shipping is too scant to permit identifying any sDecific issue in this subsector, except for the general one of administrative compartmentalization affecting transshipments mentioned above (para. 5.13). E. Ocean Shipping Fleet 5.48 Data on the size and age distribution of Chinese ships could only be obtained in general terms. The average age of oceangoing ships (1,000 GRT or larger) is now 13.8 years, which is appreciably higher than the average age of ships worldwide. Tankers in the Chinese merchant fleet vary in size, with many in the 40,000 to 90,000 dwt class, but with a small proportion of 10,000 to 30,000 dwt. Most dry bulk carriers are 20-30,000 dwt, though there are a few 70,000 dwt and 100,000 dwt bulk carriers as well. General cargo ships are generally small and under 20,000 dwt, with some in the 4,000 dwt class. 5.49 Since 1978/79 China has started to order new ship construction and continued buying secondhand vessels, while at the same time disposing of some of the older or unsuitable used vessels in its fleet. Among the new orders is a fleet of 10 RoRo vessels of 6,850 dwt ordered from Kawasaki Shipbuilding in Japan for $100 million and a larger number of semi-containerships. It is interesting to observe that while the Government is making major commitments to container terminal construction at the country's three major ports, COSCO has no orders for large mainline containerships outstanding. It has a number of small semi-container vessels with capacities of 200-300 TEU, two of which are now employed on the first direct COSCO container service between Shanghai and Australia. The RbRo vessels will probably be employed in trade with Korea, Japan, Hong Kong, and the Philippines. C46400/J89537/D1606/18 - 94 - Routes and Services 5.30 China 'hand developed extensivl tiner services between major Chinese ports and Northern and Southern Europe, the M'editerranean countries, South Asia, North America, Japan, South East Asia, and Australia. It has not joined any conferences or pooling agreements nor does it conform to cargo sharing agreements, with the exception of some instances when a formal bilateral maritime agreement has been negotiated. There is a 3% ad valorem tax on foreign operators (para. 5.33) serving China, which has some effect on non-Chinese liner services to Chinese ports, as has the fact that all charges incurred by a ship must be paid on demand and usually when incurred. Institutions 5.51 The China Ocean Shipping Corporation (COSCO) reported that as of November 1980, it operates about 450 oceangoing vessels, with a combined capacity of over 7 million dwt. It is the main agency handling foreign trade, though some companies of provincial transport bureaus (Guangdong, Fujian, etc.) have recently acquired oceangoing vessels themselves or in joint ventures with COSCO companies. (COSCO has five component shipping companies.) 5.52 The Ministry of Foreign Trade controls all of China's foreign trade through the State Trading Corporations. The transportation requirements of foreign trade are organized by the China National Foreign Trade Transport Corporation, which in turn assigns all ocean transport requirements to the China National Chartering Corporation and COSCO. Recently, provincial governments have been allowed to establish their own provincial trading corporations, which in turn may assign cargoes to different shipping alternatives or to a Provincial Ocean Shipping Corporation. 5.53 The planning, budgeting, and pricing of ocean shipping are control- led at the highest level by the State Planning and Economic Commissions and the State Pricing Bureau. Other government agencies deeply involved in the financing of foreign trade, shipping investment, charter parties, and various contractual and financial activities in ocean shipping are the Bank of China, the General Administration of Exchange Control, the Control of Foreign Investment Committee, and the China International Trust Investment Corpora- tion. Husbanding of all foreign ships calling at Chinese ports is performed by the China Ocean Shipping Agency (Penavico or COSA). COSA is the owners' (operators-) representative in China and provides for all services, supplies, port facility requirements, and general representation of foreign ships calling at China's ports. It even provides Chinese crewing for vessels not trading with China. C46400/J89537/D1606/19 - 95 - Problems 5.54 Training. There is an increasing shortage of skilled seafarers. This is a fact noted by COSCO. Yet at the same time COSA offers to provide Chinese crews for foreign operators. There are at present two (university- level) maritime academies at Shanghai and Dalien to train officers for oceangoing ships. In addition, COSCO has set up four intermediate training schools which offer 2-3 month courses followed by on-board training. In total about 1,500 officers and crew are graduated every year. In total, China is estimated to have 20,000-30,000 trained seafarers for oceangoing vessels. It appears that providing crews may become a major obstacle to the continued growth of the Chinese Merchant Marine, as 1,500 graduates a year can barely make up for normal mnanpower losses. 5.55 Fleet Utilization. The main concern of China's overseas shipping has been to capture and control a substantial proportion of its foreign trade. China stayed out of conferences and other shipping associations and as a result the utilization of its growing fleet is decreasing constantly, as it is cut out from participating in cross trade. Since China's trade is unbalanced for most destinations, there is much empty sailing after delivering exports or in going to load imports. C46400/J89537/D1036/50 - 96 - Appendix A Page 1 THE TRANSPORT -SECTOR The China Railway Society (CRAS) 1. The CRAS is a nongovernmental academic body composed of relevant scientific and technical personnel in various railway professional fields. It was founded in April 1978. 2. Objectives (a) Organize academic exchanges involving various railway professional fields (both at home and abroad). (b) Organize activities on popularizing railway scientific and technological knowledge so as to raise the scientific and technical standard of railway personnel. (c) Organize scientific and technical personnel to discuss important railway scientific and technical problems; submit to the government rational proposals and consultative advice, to be used as a reference in policymaking. (d) Compile and publish railway technical periodicals. 3. 'IembershiD. 'll scientific and technical personnel can apply for membership in the Societv if they have worked for more than three vears after graduating from colleges or institutes and have been in the posts of engineer, technician, lecturer, assistant research fellow or above those ranks, or have acquired equivalent qualifications. By the end of 1979, the total number of members of the Society was 9,461. 4. Organization (a) The highest leading organ of the CGRS is the National General Assembly which meets once in every four years. Delegates to the General Assembly are nominated by democratic election. The General Assembly elects the Board of Directors, which in turn elects the President, Vice Presidents, Secretary General and several Permanent Directors to form the Permanent Board. Under the Board is the Secretariat, which transacts the routine work under the leadership of the Secretary General and his Deputy. The First General Assembly was held in 1979, and elected the 159 members of the Board of Directors (2 reserved for Taiwan). (b) By the end of 1979, Regional Railway Societies (or a Preparatory Group of Regional Railway Societies) were established in 24 provinces, municipalities and autonomous regions. C46400/J89537/Dl036/51 - 97 - Appendix A Page 2 (c) Under the CRAS the following Committees have been established acoording co professional fields: Railway Motive Power Committee Railway Car Committee Railway Automation Committee Railway Electrification Committee Railway Transportation and Economic Committee Railway Engineering Committee Railway Material and Technology Committee Railway Standardization and Metrology Committee (d) An Editing Committee and a Popularizing Committee are affiliated to the CRAS. 5. Publications (a) "Railway Journal" (b) "Railway Knowledge," popularized scientific reading material (c) Papers and proceedings of symposiums and meetings 6. Financial Sources (a) Subsidies from the state (b) Revenue of various undertakings run bv the Society (c) Subscription (Method of subscription is not vet set. No individual subscription is collected at present) (d) Donations from indi';iduals or departments C46400/J89537/D1036/55 - 98 - Appendix B Page 1 THE TRANSPORT SECTOR Chinese Academy of Railway Sciences 1. The Chinese Academy of Railway Sciences, founded on March 1, 1950, is a polytechnic scientific and technical research center of the railways in China. 2. At present, the Academy consists of 15 institutes in charge of 91 research divisions. The total number of staff is 6,823 (including 2,561 research technicians). 3. Research subjects stem mainly from major technical problems in railway transportation, equipment production and capital construction, with due consideration for long-term problems involving theoretical studies as well as those related to railway technical/economic policies. 4. In recent years, the major target has been and continues to be the electrification of tractive forces, focused on electric locomotives. Diesel locomotives will also be developed on a moderate scale, while steam locomo- tives still have to be renovated. Efforts are also directed to a number of urgent and crucial technical problems. 5. The Academy is basically complete, with departments covering all aspects of railway science and techniques, including laboratories and test facilities. It is equipped with a variety of experimental facilities, including 15 test cars and a 9 km test loop located in the eastern suburbs of Beijing where locomotives and rolling stock as well as the track structure can undergo operational tests and stress determinations. There is a library furnished with more than 220,000 books and over 1,800 kinds of periodicals. 6. Orientation and Assignments of the Institutes (a) Railway Transportation Research Institute. Fo-unded in 1959 - 5 research divisions - 123 staff members in total. Responsible for: research of railway technical/economic policies; theoretical problems of railway transportation and economy; organization of railway operations; overall planning and designing of stations and junctions; technical requirements and facilities of both passenger and freight transport; economics C46400/J89537/D1036/56 _ 99 _ Appendix B Page 2 of railway transportation, industrial production and construction, train operation and enterprise management; systematic application of computers in operational and managerial fields. (b) Railway Construction Research Institute. Founded in 1952 - 11 research divisions - 321 staff members in total. Responsible for: research with respect to construction of new railway lines; technical renovation of existing lines; and developing of new structures, new techniques and theories concerning railway construction and renovation as well as defense engineering. (c) Locomotive and Rolling Stock Research Institute. Founded in 1958 - 9 research divisions - 289 staff members in total. Responsible for: research with respect to theoretical problems involved in locomotives and rolling stock matters; major technical problems which envisage long term, guiding polytechnique nature; and also research work on technical parameters of new or prototype products and the testing evaluation of principal component parts. (d) Communications and Signalling Research Institute. Founded in 1956 - 8 research divisions - 214 staff members in total. Responsible for: tesearch of automatic signalling sytem and installations; theoretical problems involved; special communication systems for different functions; data transfer; automation systems of wire, radio or microwave communications, traffic control, train classification and train operation. Application of electronics, electromagnetic and computer techniques and other related new techniques in railway communication and signalling fields, aiming at raising efficiency of transport, ensuring traffic safety, improving labor conditions and raising level of automation and modernization. (e) Metals and Chemistry Research Institute: Founded in 1956 - 8 research divisions and one chemical analysis laboratory - 217 staff members in total. Responsible for: research and develop- ment of new materials, new technologies and techniques and new devices including systematic research of railway steel series, heat treatment techniques, welding technologies, nondestructive testing, anti-corrosion techniques, fracture mechanics, contact damages, corrosion and lubrication; research on transistor-based electronic parts and functional materials; application of high polymer materials and synthetic materials on railways; physical and chemical techniques for evaluation and test of materials. (f) Computer Technique Research Institute. Founded in 1979 - 5 research divisions - 110 staff members in total. Responsible for: research work on mathematical processers in the application C46400/J89537/D1036/57 - 100 - Appendix 3 Page 3 of computer techniaue computer netwock and system structures, special computi.ig equipments, computer program operation Dvst-m and arithmetic languages in the field of railway management and industrial automation. (g) Mechanization Research Institute (in Beijing): Founded in 1979 - 2 research divisions - 64 staff members in total. Responsible for: mechanized operation of cargo handling, track maintenance and construction. (h) Scientific and Technical Information and Research Institute, Ministry of Railways. Founded in 1958 - 8 information and documentation divisions and one publishing division - 173 staff members in total. This institute is the information center of the railway system in our country. Responsible for: compiling information for use in railway technical policymaking, planning of scientific and technical research programs and exploitation of railway potentials by way of technical innovation and reformation on the basis of collection of information and documentation available at home or abroad; editing and publishing periodicals; service of books and documentation, duplication and retrieval. (i) Standards and Metrology Research Institute, Ministry of Railways. Founded in 1965 - 5 research divisions - 144 staff members in total. Responsible for: research work on theories and methods of standardization of railway products; research and formulation of polytechniques and new measuring and weighing apparatus. It is also responsible for consignments by the National Truck Weighing Station, and transfer and check of weights and measures. (j) Southwest Research Institute (in Emei, Sichuan Province): Founded in 1961 - 6 research divisions and one information division - 343 staff members in total. Responsible for: research work on theoretical problems in design and computation and technical problems concerning tunnelling engineering in mountainous areas; technical problems in relation to geology in tunnelling and construction of tract engineering and tall piers in mountainous areas; hydraulic and hydrological problems. (k) Northwest Research Institute (in Lanzhou, Gansu Province): Founded in 1962 - 3 research divisions - 348 staff members in total. This institute is engaged mainly in research work on railway roadbed and engineering geology. It is commissioned with research work on roadbed construction under poor geological conditions such as loess, desert, permafrost (including Salt Lake), collapses and landslides, and the related surveying, exploring and measuring techniques. C46400/J89537/DlO36/58 - 101 - Appendix B Page 4 (1) Sipang Rolling Stock Research Institute, Ministry of Railways (in Qingdao, Shandong Province): Founded in 1959 - 4 research divisions and one information division - 443 staff members in total. Responsible for: research, design and trial manufacture of new models of passenger coaches and freight cars including components and parts; research of new rolling stock techniques; tackling major technical problems in operation. (m) Dalian Diesel Locomotive Research Institute, Ministry of Railways (in Dalian, Liaoning Province): Founded in 1950 and reformed in 1955 - 6 research divisions, one standardization division and one information division - 431 staff members in total. Responsible for: research, design and trial manufacture of diesel locomotives and major components and parts such as turbochargers, hydraulic transmission packs, car bodies and bogies, etc. (n) Qishuyan Locomotive and Rolling Stock Technology Research Institute, 'MIinistry of Railways (in Changzhou, Jiangsu Province): Founded in 1959 - 6 research divisions, one information division and one standardization division - 499 staff members in total. It is engaged mainly in research of new technologies, new techniques, new materials and new installations for manufacture and repairs of locomotives and rolling stock. (o) Zhuzhou Electric Locomotive Research Institute, Ministry of Railways (in Zhuzhou, Hunan Province): Founded in 1959 - 6 research divisions, one information division and one standardiz- ation division - 404 staff members in total. Responsible for: research and design of new electric locomotives; technical renovations of existing ones; high-power 'thyristors; A.C. electric system for motor train-sets; as well as electric motors and apparatus. C46400/J89537/D1036/59-62 - 102 - Aopendix C THE TRANSPORT SECTOR ?roposed iiighwav Sector jtudies Resources Recuired :ssue ?rioricv Timing Local Foreizn Hignway ranpower requirements 1 1981/82 Sr. engineer witn substantial Hignways manpower and craining .lan experience in nanagerial capaci- soecialtsc tor n aoncns ties in roads department operations (2 vislt3) and with relevant ecucation for 18 months. 'Would reauire auostantial travel within China -o aassess needs at different _evels in different provinces. Deman- forecascing, zncluding , i981 and Transport economist *r narKating -ransoort econosist thac for coopeCing mcces speciallst full-t4ne ror 1 year - for n uonctn half-time thereaftar. (lis:s) Coscs s ServiceS ,.larac- 1 1981/32 Transoort economisc, .ul' zime, -ransrort economlst,/ er_stc_s oc road 'rans3ort icth half-time engineer and :ruck- dngineer.'or .oad cost oai: -G nuft;iodal com- ing 'o0S soecialist - a_l for 3e-list :r 3 utra's Darat :e scuoy) s aonths. ' sLc5) oar, transport pricing, user i981 Iransport economist and I fiscal 7ransoort economist charges and financiag specialist full-time for 6 months .or montns/a mecnaniss ms plus trucking cost speciali3t ror (: visit) 3 months. .2ptiaum truck size and weignts 2 1982 Transport economist or engineer rngineer-economiat full-tine vith part-time assistance for 6 monzhs from -ruck fleet ;oec'alist, pave- 2 visit.3) ment researcn engineer anc motor venicie manufacturing spec:alist for one year. Road construction matertals: i981/32 Materials engineer full-tiae for ','!sit by C,hinese review of state of the art ' year, 4tth chemical angineer, 3pecialist :o *urooe and evaluation of alternative preferably with exverience in coal .olu-.ons .rocessing and pecroleum refining, tor six months. :nitial study would delineate any further research required. Cost incerrelationships among 2 1982 Ititial study (lasting 6 months) by ?ossibly visit by road conscruction, mainte- Phase I transport economist, pavement Chinese specialists aance and vehicle operating research scientist, and systems to India, USA and costs analyst would focus on (i) detailed 3razil review of Kenya, 3razil,and India and similar research elsewhere to adapt for utilization in China; and (ii) definition of further research required for Chinese conditions. /a Transport economists and trucking cost specialists for Studies 3 and 4 would oreferably be che same individuals. C46400/J89537/D1606/50 - 103 - Appendix D Page 1 THE TRANSPORT SECTOR Chang Jiang Shipping Authority (CSA) 1. General. The Chang Jiang passes through nine provinces plus the municipality of Shanghai and has a total length of 6,300 km. The river basin covers an area of over 1.8 million sq km containing a population of over 300 million and an agricultural area of 400 million mu. The navigable length of the Chang Jiang itself is about 3,000 km, and there are about 15,000 km of navigable tributaries. The CSA controls shipping on the main course of the Chang Jiang while the tributaries are generally under the control of the governments in the provinces through which they run. The CSA provides most transport on the main river and was, until recently, precluded from extending its services to coastal shipping, though it could participate in direct services between the main river and its tributaries. As main river tariffs are substantially lower than most tributary tariffs, few tributary operators (provincial, county or municipal enterprises) provided services on the main river, though some did provide&intertributary/main river service. CSA freight traffic has grown from only 300,000 tons/year in 1949 to over 46 million tons/year in 1980. 2. River Hydraulics and River Domain. The Chang Jiang is divided into seven sections. The main channel is mostly in natural condition. Upriver sand and silt.is dredged and rock occasionally blasted to maintain required depths. The condition of the seven sections is as follows: Length Section dwt/a (km) 1. Shanghai-Nanjing 20,000 337 2. Nanjing-Anqing 5,000 302 3. Anqing-Wuhan 5,000 404 4. Wuhan-Chenglingji 3,000 232 5. Chenglingji-Yichang 3,000 394 6. Yichang-Chongqing 1,500 660 7. Chongqing-Yibin 1,500 384 /a This is the capacity of vessel (self- propelled) that can be used during medium and high water, i.e. for about seven months/ year. C46400/J39795/D1606/51 - 104 - Appendix D Page 2 The CSA, through its Nlavigation Channel Bureau is responsible for navi- gational a-ds, which are mainly automaticallv controlled (dry battery or solar cell powered) 3. Organization, Administration, and Fleet. The administration of CSA consists of three levels: (a) CSA Headcuarters Administration; (b) Shipping Administration Bureau and Branch Offices; and (c) Small Ports. The CSA has five branch offices in Chongqing, Wuhan, W7uhu 'Nanjing, and Shanghai and three shipyards. At headquarters, the planning division performs an investigation of cargo shipping demands in the form of feasibility, origin/destination, and transport flow studies. The relationships between capacity and costs of transportation by water, rail, and road are developed, and consideration is given to integrated multimodal transportation. 4. Guidelines for annuaL planning are given by the State Planning Commission in November. Thereafter all large enterprises draw up an annual production plan, as well as a transport requirement plan, prepared in collaboration with transport operators such as the railways and the CSA Current CSA transport capacity for mixed cargo and coal is inadequate. In recent years the Planning Commission has encouraged competition among agencies, although every one must charge the same rate and compete only on service. In principle, three-year plans are developed and reviewed in annual Ministry of Communications Cargo Resource" Investigative Meetings. An annual task (or assignment) meeting is held each year in August/September with the State Planning Commission and the Ministry oL- Communications, at thin> >e next year s assignments or tasks are determined and agreed upon. ' : e short-term nor long-term plans were available. 5. Most shipping services are supplied by the CSA on a contract basis, usually on a year-by-year basis. Terms and conditions are decided by inter- ministerial agreement and approved by the State Economic Commission and the State Pricing Bureau. For example, large freight contracts may be negotiated among the Ministries of Metallurgy, Communications, and Railways. The total planned assignment for CSA is determined by the Ministry of Communications. Prices are based on eight classes of cargo, with differential up and down river tariffs. There is a minimum charge for a 50 km distance. Tariff changes must be approved by the State Pricing Bureau. The 12 largest cargoes are coal, oil, iron ore, steel and iron, timber, grain, chemical fertilizer, cement, construction material, salt, nonferrous ores and general cargo. Demurrage on cargoes is usually paid by the user (cargo owner) enterprise at terms agreed upon (3 days' free time). Cargo contracts do not allow volume discounts. C46400/J89795/D1606/52 - 105 - Appendix D Page 3 6. Port Facilities. The CSA owns and operates 25 -ports on the main river plus terminals at Shanghai. With the exception of some of the main terminals at Wuhan, Nanjing, and Shanghai, most terminals consist of floating docks served by floating cranes. In many cases cable cars with wheels are used to move cargo from the floating dock up a ramp on the adjacent embankment. The two biggest CSA ports are Nanjing and Wuhan, both of which have bulk cargo facilities with fixed berths, including coal conveyors, and ship loaders, as well as floating crane transfer from fixed berths. The total amount of cargo handled by CSA port or terminal facilities was about 92 million tons in 1980, while 86 million tons were handled by ports under the jurisdication of the CSA in 1979. 7. The average turnaround time in port for a vessel at one of the major CSA ports was 5-7 days, largely because of the limited storage area. The average number of working days lost due to rain was 35 days/year for major bulk cargoes (coal, ore, grain, etc.) and 65 days/year for general cargo. Seventy-eight percent of the cargo transferred at CSA ports and terminals is from or to CSA's own vessels. While CSA ships may use other terminals this is usually difficult for operational reasons and is usually only done at tributary ports. 8. Existing Fleet and Shipbuilding. The fleet is composed of about 2,000 vessels with a capacity of approximately 1.7 million dwt. It includes 200 push or pull tugbocats, 1'0 pass2nger or combination passenger and cargo vessels, 40 freighters, and about 1,600 barges of all types. Many more vessels are owned by provincial, county or municipal enterprises, some of which are based on the Chang Jiang or provide transport on the Chang Jiang. The CSA has its own shipbuilding and repair facilities and operates major shipyards at Chongqing, Wuhan, Nanjing, Wuhu, and Shanghai. These yards build most of the vessels for CSA including ship equipment. Practically all ship repairs are performed by CSA yards. Similarly, yards and workshops build most port equipment (cranes, conveyors, forklifts, etc.). The only vessels contracted out are large 5,000 dwt oil tankers. 9. Licensing Regulations. Licenses for operation on the Chang Jiang are issued by the Harbor Superintendency Bureau of the M4inistry of Communi- cations. All ships must be inspected before licensing and must annually maintain their licenses in force. Vessels operating on tributaries are usually licensed by local authorities. 10. Communications. The CSA has its own telephone network and VHF station at each dispatch office. C46400/J89537/D1606/ 53-54 - 106 - Appendix S vE RtANSPORT SEC:OR Su=ary of Major Chinese Port Daca, 1979 Total no. of total Equipmenc Total berths with rail Storage Storage Storage sets total Throughput berth Total capacity length area area area mechanized in million length no. of exceeding in port cotal covered open equipment) conslyear (a) berths 10,300 dwt ('km) q(000 sq ra) total /a 212.57 43,892 313 133 422.0 5,355 1,362 3,993 7,075 Dalian 31.48 9,346 63 23 127.7 1,140 277 863 521 Yingkou 0.25 328 8 - - 96 10 86 41 Ttanjin 12.70 4,423 27 12 20.6 279 90 289 636 Yan:ai 4.60 1,Z5 I5 3 '.3 94 s0 564 99 O:nhuangdao 24.08 2,070 11 9 63.2 740 54 686 263 Qingdao 18.02 4,595 24 9 5.9 219 40 179 439 tlsanyungang 6.81 1,308 9 5 5. '355 13 142 404 Shangha. 83.50 12,762 95 50 11.8 1,763 613 1,150 3,266 Shancou 1.75 330 3 - - 53 2S 23 132 Huangpu (Guangzhou) 12.11 2,470 14 12 35.1 310 103 207 420 Zhanjiang .0.62 2,007 14 a 47.0 265 70 195 369 z.aikou 0.83 74I 10 - - 29 11 13 69 3asuo (Dongiang) 3.05 628 4 2 0.9 .3 5 38 49 Sanya (Yaxian) 0.41 205 3 - - 2 7 i9 51 ilingbo 2.36 834 13 0 - 43 11 32 216 Ia For the i5 ports that come under the MOC. Source: Planning Department, Ministry of Comaunications.