Empirical Analysis on the Structural Changes in Railroad Logistics in China

Author Name MENG Jianjun  (Visiting Fellow, RIETI) /ZHANG Hongyong  (Fellow, RIETI)
Creation Date/NO. May 2015 15-J-024
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In China, with its vast land area, railroad transportation plays the most important role in forming an extensive basic logistics structure and logistics system. However, since 1949, railroad logistics has not been used freely as it has been managed under the centralized control of the Ministry of Railways, which is a semi-military organization in nature under a national strategy. Since shifting to reform and opening-up policies in 1978, economic resources have been mobilized as a result of the revitalization of the local economy, and railroad logistics has commenced according to the market mechanism toward the unified local economy, namely, the unified domestic market. In March 2013, the Ministry of Railways was dismantled, and China Railway Construction Corporation, which is a business organization, was officially founded. As a result, the managing right and ownership of railroads that was monopolized by the state as well as the market including railroad construction was opened fully to private enterprises and local governments, thereby triggering a gradual commercialization of railroad logistics.

This paper--focusing on the significance of railroad logistics during the reform and opening-up period--aims to clarify the relations between the structural changes in China's railroad logistics and the unified local economy due to commercialization by conducting an empirical analysis with a gravity model using data on inter-regional rail freight transportation volume from 1990-2012. Through such empirical analysis on railroad logistics, the following important facts were observed. Although structural changes in railroad logistics are influenced by the physical distance between regions, long distance transportation has commenced along with economic growth in each region, thereby moving toward integrated local economies. In particular, growth in demand in the secondary industry located in each spoke in the road networks largely contributes to structural changes in railroad logistics. Concurrently, it should be noted that the structural changes in railroad logistics are still under the influence of state-owned enterprises from each region.