Who Benefits From Railway Ministry Spin-off?

The State Council announced plans earlier this month to break up the Ministry of Railways as part of a broader restructuring of China’s massive bureaucracy, with a new commercial entity called China Railway Co. assuming all the assets, debt and personnel of China’s last major monopoly. Despite the talk of reform, however, The New York Times’ Didi Kirsten Tatlow reports that some are suspicious about the details of the spinoff:

The ministry was officially valued around 4.3 trillion renminbi, or $690 billion, according to The 21st Century Business Herald, but that paper and the corruption researcher doubt the figure. As an entity that transports hundreds of millions of passengers yearly, with stock and other assets, he said, “It’s got to have assets of about 20 trillion.”

Like many, he worried the low valuation was deliberate, to facilitate a purloining of state assets by powerful families.

The speed of its disappearance is also striking. On March 10, a report on the change was presented to the National People’s Congress. On March 17, the new sign for the China Railway Corp. was already up at its premises. The state-owned company has taken over commercial operations while regulatory functions have been transferred to the Ministry of Transport.

According to the corruption researching who spoke with Tatlow, the cynical question hanging over the breakup of the Railway Ministry is whether powerful families have sliced up the organization into pieces for themselves. Still, Bloomberg reported that the move to distance the railway industry’s commercial operations from the government will bring it in line with other sectors such as aviation and telecom:

“Railway was the only ministry that didn’t separate administration from management,” Zhao Jian, a professor of economics at Beijing Jiaotong University, said in a telephone interview yesterday. “The breakup is a very significant step as a prelude to reform.”

Read previous CDT coverage of China’s railway industry, including how systematic failures led to rampant which in turn led to the deadly July 2011 Wenzhou train crash.


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