Tashkent, Uzbekistan (UzDaily.uz) -- Experts from the Institute of Macroeconomic and Regional Studies (IMRS) have analyzed China’s experience in reforming the railway sector.

In 1949, China had only 22,000 km of poorly maintained and war-damaged railways, of which less than 1,000 km were double-track, and electrified railways were practically non-existent.

By the present time, the Chinese government has expanded the country’s railway network more than fivefold and made significant improvements in the quality and potential of its own railway sector. In particular, the high-speed network has been substantially expanded, and China currently holds the top position in the world for the length of high-speed railway lines.

The railway reform in China is a unique example of enhancing the industry’s performance and efficiency through centralized management and financing based on a government-led network expansion program. Thus, the main difference in the reforms conducted in China lies in the leading and dominant role of the state sector.

Up until 2013, the industry was supervised by the Ministry of Railways, which determined the strategic directions and policies for the railway sector. In 2013, the State Council dissolved the Ministry, separating its strategic and regulatory functions from commercial ones. Even after the reform, the involvement of the private sector continues as a supplementary instrument to achieve overall development goals.

It is worth noting that before the reforms, the railway sector faced several systemic problems that led to its unprofitability:

1. High debts of the railway sector. By the end of the third quarter of 2013, the debt-to-equity ratio was 76% (by the third quarter of 2021, the figure had decreased to 50%).

2. Scandals related to fraud. For example, former Railway Minister Liu Zhijun was dismissed in 2012 for accepting bribes. The state news agency Xinhua reported that he used his position to help the chairman of an investment company gain "huge illegal profits."

3. Low efficiency of the industry. The sector often failed to meet work standards, resulting in low-quality services.

The key points of the reforms included:

Clear separation of functions and responsibilities among managing organizations.

- Ministry of Transport - planning and development of the transport sector as a whole.

- State Railway Administration - adoption and control of technical standards and safety standards compliance.- China Railway Corporation - commercial operation of the railway.

- 18 Regional Railway Authorities - operation of trains and infrastructure condition in the region.

Enhancement of efficiency. The government implemented measures aimed at improving railway efficiency through stricter work standards and improved service quality.

Introduction of competition in the industry. Currently, several companies operate in the railway sector, including Hochtief, China Communications Construction, CRRC, and Transwind Infrastructures.

Attraction of private capital. China allowed private companies to invest in railway infrastructure and operate their own trains. Moreover, in 2022, China launched its first high-speed railway project under private sector management. The project, valued at 44.9 billion yuan (7.1 billion US dollars), was built through a public-private partnership model in which the private sector holds a 51% stake.

As a result, the railway sector reform in China in 2013 addressed systemic problems such as low efficiency and high debts, and laid the foundation for the industry’s transition to a competitive environment and the attraction of private capital.