China Railway on track for first annual loss; cargo volume contracts

By Liang Fei Source:Global Times Published: 2016-1-26 21:33:01

Rising passenger traffic can’t offset slack shipments by industrial users, experts warn


Freight trains in Qingdao, East China's Shandong Province. File photo: CFP
 

 

Graphics: GT



Rail freight volume in China dropped to a 5-year low in 2015, official data showed Tuesday, and that may mean the first annual loss for the national railway operator, experts said.

Rail cargo volume fell 11.9 percent year-on-year to 3.36 billion tons, according to the National Development and Reform Commission (NDRC). In the fourth quarter alone, volume slid 13.4 percent year-on-year, compared with a fall of 13.9 percent in the third quarter.

Cargo volume is the major revenue source for China Railway (CR), which was formed in 2013 after the Ministry of Railways was dissolved.

CR reported a net loss of 9.4 billion yuan ($1.43 billion) in the first three quarters of 2015, and it probably didn't make a profit during the fourth quarter sufficient to offset those losses, the Beijing-based Securities Daily reported Monday.

The plunge in cargo volume was mainly caused by shrinking commodity demand, as the industrial sector is still burdened with severe overcapacity, experts said. Though railway passenger traffic increased by 10 percent in 2015, according to NDRC data, experts said that rise wasn't nearly enough to offset woes in the cargo operations.

"Things are not very likely to improve in 2016, given the overall economic slowdown," Wang Mengshu, a railway expert at the Chinese Academy of Engineering, told the Global Times Tuesday.

The slowdown in railway cargo comes as China is boosting investment in its rail system. Media reports have said that investment in the sector will be about 800 billion yuan in 2016, almost the same as in 2015. The central government, local governments and CR will fund that investment, Wang said, which will add to the company's financial burden.

Previous media reports have said that CR's debt reached 3.94 trillion yuan by the end of the third quarter in 2015. "Interest payments alone are a huge burden," Wang said.

Calls to CR went unanswered Tuesday.

Rail cargo volume - along with electricity use and new bank loans - are reportedly used by Premier Li Keqiang to gain a more accurate picture of the economy than the official GDP number.

The three indicators are collectively dubbed the "Keqiang Index," and reports on rail cargo volume draw intense media scrutiny.

But some experts have said that rail cargo volume and electricity consumption, while useful in gauging the performance of industry, don't provide a complete picture of the economy, which is undergoing structural changes.

"The services sector and consumption have become new driving forces for the Chinese economy," Xu Hongcai, director of the Economic Research Department at the China Center for International Economic Exchanges, told the Global Times Tuesday.

Li himself wrote in an article published in The Economist in November 2015 that employment, personal income and environmental improvement should also be emphasized to gauge economic conditions.

  

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