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CRC unveils freight reform plan

By Zhang Ye (Global Times)

13:31, June 17, 2013

China Railway Corp (CRC), a national railway operator and spin-off of the former Ministry of Railways, said Saturday that it has started to reform its freight transport business, a move that will reduce the logistics costs for bulk commodities but will have little impact on the country's express industry in the short term, analysts said.

The company aims to transform its freight transport business into a modern logistics service, and increase its share of the domestic logistics market, Xinhua News Agency reported Saturday, citing an unnamed spokesman at CRC.

The reforms will include simplifying procedures, and offering tailored transportation services to clients via the company's hotline and online service. CRC also said it will set up a nationwide network to offer door-to-door pickup and delivery services with standardized charges.

Various procedures that used to take several days to complete can now be done via a simple phone call, news portal reported Saturday, citing Li Jun, a staff member from a flour mill in Central China's Henan Province.

A report by Beijing-based Qianinfo Consulting attributed the move to pressures from the country's sluggish freight transportation market, especially for bulk commodity transportation.

In the first four months of the year, a total of 1.3 billion tons of goods were transported via national railways, a 2.52 percent decrease year-on-year, said the report.

CRC's most recent financial results showed that its debt-to-asset ratio reached 62.23 percent at the end of 2012, compared to 60.63 percent at the end of 2011.

It is hard to say whether the reforms will enable CRC to make a profit, as its operating costs are very high, but the move is likely to reduce the costs for transporting goods like coal, oil and chilled fresh food, Xu Yong, chief advisor of China Express and Logistics Consulting, told the Global Times Sunday.

The railway transportation costs will be cut to one third of the previous amount, which is likely to attract many private logistics companies to apply for railway transportation, noted Xu.

Railways will become a very competitive option for delivering goods over distances of 800 to 1,000 kilometers, Xu said.

Sun Jian, vice president of Shanghai YTO Express (Logistics) Co, told the Global Times Sunday that if CRC could figure out a mature plan for delivery services using high-speed trains, "we would love to try it," as it could help to diversify their delivery methods.

The reform effort will increase competition for the current two major methods of goods delivery - air freight and auto transportation - said Sun, but it is hard to tell whether the delivery charges will be lowered for consumers, as the CRC has not revealed sufficient details.

Xu predicted that launching the use of high-speed trains for the express delivery sector will take at least two years, so consumers will not gain any benefits from the reform in the short term.

Leading e-commerce firm Alibaba, which announced in May it would form an integrated nationwide logistics network, told the Global Times that they also expect to have a partnership with the CRC.

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