The Ministry of Foreign Trade and Economic Co-operation (MOFTEC) and the Ministry of Railways issued a notice in August, opening up China’s railway freight market to foreign investors.

Foreign companies are allowed to set up joint-venture railway freight service companies with Chinese partners, said the notice.

Some analysts saw this as a significant move in the background of China’s reform of its railway industry.

Permission for joint-venture railway freight service companies is a major step that the Chinese Government has undertaken to reform its railway industry, they said.

Senior railway officials were earlier reported as saying that China is to separate passenger transport service companies, freight service companies and railway companies in 10 years.

Minister of Railways Fu Zhihuan was also quoted as saying that reform is the pivot of the ministry’s work next year.

Companies attached to railway bureau at different administrative levels of the country take charge of China’s railways, passenger transport services and freight services at present.

Like many other state-owned companies that have come out of China’s planned economy, these companies are characterized by bureaucracy and inefficiency.

With China’s coming entry into the World Trade Organization and the country’s commitment to gradually opening up its railway industry, analysts said railway officials are reforming and preparing state railway companies for expected challenges from foreign competitors.

Opening up the railway freight service market to foreign investment is expected to introduce scientific management and advanced technologies to domestic companies.

But foreign investment officials with the MOFTEC told China Daily that until last week they had received no applications for joint-venture railway freight service companies.

An official with the international cooperation department of the Ministry of Railways said on Thursday that no domestic railway companies have shown the intention of cooperation with foreign investors until now.

The official, who spoke anonymously, added that joint-venture railway freight service companies are unlikely in the near term.

The opening up is limited: foreign investors must be financially strong, have no less than 10 years’ operation experience in the railway freight service industry and have a good performance record; Chinese partners must have over 10 years’ operation experience in the industry and hold over 51 percent shares of the joint venture; the joint venture must have over US$25 million registered capital and must not be operated for more than 20 years.

“All of China’s state railway companies are qualified but they do not want or need foreign investment,” said the official.

He said China’s railway freight service is already competitively priced and is not afraid of challenges from foreign competitors even after the country’s WTO entry.

Turnover of China’s freight service industry is expected to increase 5.2 percent year-on-year to 1.65 billion tons, official statistics indicate.

(People’s Daily 12/24/2000)