Major Shakeup in Chinese Rail: Ministry to become an SOE
As the 3,000 person National People’s Congress meets for its annual session and spectacle in Beijing, major shakeups are happening in China’s railway industry. Caixin Online reports on new plans just announced to turn the CCP’s Ministry of Railways into a single, unnamed, state owned enterprise (SOE). All 18 of the Ministry’s bureaus and its three private companies are to be considered assets of the new SOE, and its initial capital will be 1.036 trillion Yuan (167 billion dollars). What does this mean for the continent building project that is China’s railway development? The answer is impossible to tease out, but a few angles need to be examined
Looming largest is the major corruption scandal that hit the Railway Ministry in February 2011, when Minister Liu Zhijun and two top deputies were detained and investigated for “severe violations of discipline.” One of deputies, Luo Jinbao, was put on trial in late December of last year, accused of taking $7.5 million in bribes, cars, and property, as well as illegally owning a (single) shotgun. While the results of the trial have yet to be announced, he will almost certainly be found guilty, and may face execution. Such a penalty was the fate of Shen Chungfu, director of the Chongqing branch of China Mobile. Despite being the head of the world’s largest cell phone company in the world’s largest city, Shen was taken down in the same corruption purge as Luo, put on trial in November 2011, and will be killed within two years.
The trial date for Liu, who had been Minister of Railways since 2003, is unknown. However, it will certainly be high profile event, as Liu was the face of the Chinese rail boom of the 2000’s. While the U.S. was busy waging war, Beijing decided it was about time to cover Eurasia in railroad tracks, and high-speed ones to boot. Since 2008, when China completed its first high-speed line for the Olympics, the Ministry has built 5,809 miles of high-speed track, and more than ten times that amount or regular rail track. Liu also signed deals with a large number of other Eurasian countries to build international rail lines, and since 2011 the German national rail company, Deustche Bahn, has been running everyday overland rail transport between China and Western Europe. Without a doubt, Liu’s Ministry was an empire builder. Do the new plans to turn the ministry into an SOE signal a shift, a purge not only of people but of policy as well?
Finally, it is absolutely critical to question whether new reforms will help lead to better safety and good governance in Chinese rail development. Liu garnered a nickname as Little Leap Liu, as people thought his policies progressed to quickly, breeding corruption and shoddy work. There has been only one major high-speed rail crash, but charges are common that the Ministry cut corners when building so many miles of track so quickly. And as railroads have already become the dominant method of transport for domestic travel in China and are quickly gaining large parts of the market share for international trade, their proper and safe functioning is close to a global imperative. Industry depends on it, as do the 1.3 billion Chinese people and the millions of Kazakhs and Turks and Burmese and others whose countries are working with Beijing on railroad projects. It is not out of the question to call it the new backbone of the global economy. Will changing the Ministry of Railways into an SOE help put an end to shoddy workmanship and corruption? Definitely not. Will it help? Possibly. But regardless, it is a development that needs to be closely followed.