ARCID China Policy Brief Volume 1, No. 3

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Somchai Thamsutiwat

Asian Research Center for International Development (ARCID) Mae Fah Luang University, Thailand

ARCID CHINA POLICY BRIEF VOLUME 1, NO. 3 NOVEMBER – DECEMBER 2018 CHINA’S RAILWAY TRANSPORTATION POLICY

© All Rights Reserved Author: Somchai Thamsutiwat

ISSN: 2630-0877 First published in 2018 by ASIAN RESEARCH CENTER FOR INTERNATIONAL DEVELOPMENT (ARCID) School of Social Innovation, Mae Fah Luang University 333 Moo1, Thasud, Muang, Chiang Rai 57100, Thailand Tel : +66 5391 7137 Fax : +66 5391 6685 Email : arcid.social-innovation.school@mfu.ac.th Website : chinawatch.today, social-innovation.mfu.ac.th/arcid.php Facebook page : www.facebook.com/ARCIDTHAILAND www.facebook.com/chinawatch.arcid Printed by TECHNO PRINTING CENTER 643 Utarakit Road, Wiang, Muang, Chiang Rai 57000, Thailand Tel/ Fax : +66 5371 8841 Email : tpccri@gmail.com

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ARCID China Policy Brief Volume 1, No. 3 November - December 2018

China’s Railway Transportation Policy

Preface ith economic reforms and the opening up of the People’s Republic of China (PRC) to the outside world by Deng Xioaping and post-Deng leaders, China is now the largest economy (on a purchasing power parity basis). All indications show that China will be a superpower. The meteoric rise of China in the 21st century signals the successful comeback of China in regaining its respectful place in regional and international affairs. It also means challenges as well as opportunities for other parts of the world, especially for countries in the Asia Pacific region.

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For many of us, the big question is: how should we deal with such a rising superpower? Other questions may include the following: Is China’s rise going to be sustained? What are the new directions mapped out by Xi Jinping to develop China? What sort of developmental challenges will it face? Is China a threat according to some analysts? How can we promote a win-win relationship with China? How can we manage our problems, if any, with China in order to preserve peace and development?

To answer these questions, the Asian Research Center for International Development (ARCID) of the School of Social Innovation at Mae Fah Luang University has launched the China Watch Project with a grant from the Thailand Research Fund (TRF). We would like to express our thanks to the TRF for its funding support and suggestions in improving the project proposal.

As part and parcel of the China Watch Project, ARCID has established a Monitor and Analysis (M & A) Unit surveying and analyzing major developments in China. Located in Northern Thailand, ARCID would like to take advantage of its geography and focus its research more on the Mekong region and its relations with East Asia, including China. We hope this strategy could help a young research center to establish a niche in the academic, intellectual and policy community. In this regard, the ARCID China Policy Brief is produced by the M & A Unit to examine policy issues on ASEAN-China relations in general and Thailand-China relations in particular. Inaugurated in August 2018, the ARCID China Policy Brief is published a few times a year. Finally, it has to be understood that the views expressed are those of the authors.

Lee Lai To, Ph.D. Senior Professor and Director ARCID

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ARCID China Policy Brief Volume 1, No. 3 November - December 2018

China’s Railway Transportation Policy

About the Author: Somchai Thamsutiwat Bachelor of Law LL.B.and Master of Law LL.M. from Chulalongkorn University.

Lecturer, School of Law, Mae Fah Luang University.

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ARCID China Policy Brief Volume 1, No. 3 November - December 2018

China’s Railway Transportation Policy

China’s Railway Transportation Policy SOMCHAI THAMSUTIWAT1* Transportation is important for a society as the mobility of the people is related to the economic and social advancements of a new society 1 . Railway transport is a transportation system with low-cost investment and it can accommodate mass transit. It is also energy efficient and environmentally friendly when comparing to road and air transportation. A good railway development must comply with urban planning that is harmonious with the national plan on sustainability. Urban planning policy and railway transportation will create full-cycle benefits because more people will migrate to the city and it will help reduce time losses in traveling thus increasing efficiency for economic activities. In addition, the revenue from the transportation and related services will circulate to new investments for rail network expansion2.

The development of the railway system is closely related to China’s national reform and development policy as stated in China’s Eleventh Five-year Plan for National Economic and Social Development (2006-2010) emphasizing the connectivity of the transportation and logistics networks3. The Twelfth Five-year Plan for National Economic and Social Development (20112015) focused on clean energy and carbon reduction4. The Thirteenth Five-year Plan for National Economic and Social Development (2016-2020) stresses the importance of the high-speed railway transportation infrastructure 5 . Regarding China’s national reform, the Chinese government draws lessons from practical experiences and creates theories and practices to enhance the national reform on the transportation networks for the high-speed railway system.

The high-speed railway system is the heart of the national development on science and technology. The Chinese government aims to transform its dependency on foreign technology of the high-speed railway system into self-reliant development and innovation. As a result, China has shifted its role from a ‘follower’ to a ‘leader’ in this sector.6 This article intends to find out what are the Chinese strategies and reforms on railway transportation that have led China to become the word’s exporter on railway transportation technology.

First, China’s railway transportation policy The Chinese railway transportation policy has been taking shape since the Eleventh and Twelfth Five-year Plan for National Economic and Social Development. Before that, the Chinese government could not respond to the people’s demands on the public transportation system as a result of the lack of efficient management7. Notably, responsibilities of railway and transportation were related to many government agencies. As a consequence, policies on national transportation system were uncoordinated, reflecting the weak logistics industry in China 8 . Therefore, the Eleventh and Twelfth Five-year Plan for National Economic and Social Development emphasized the importance of coordinating domestic railway networks to enhance the infrastructure of national transportation and logistics for urban planning as well as to link cities in different regions to achieve equal development growth through supporting renewable energy and green development 9 . The Thirteenth Five-year Plan for National Economic and Social Development

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LL.B.(Chulalongkorn University) LL.M.(Chulalongkorn University) This paper is part of the short-term research exchange under the academic cooperation in Social Sciences between National Research Council of Thailand (NRCT) and Chinese Academy of Social Sciences (CASS), 2016.

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specifies the strategy on “pursuing Innovative Development and strengthening the Quality and Benefit of Development”, particularly on railway infrastructure and on “putting priority to projects, such as high-speed train development”10. The following details are the Chinese policies on the railway system.

1) The Chinese railway system would use the standard gauge of 1.435 meter, and the maglev system for the high-speed train would be used only in some routes, for instance, the Shanghai maglev train line (between Shanghai Pudong International Airport and Longyang Road Station) 2) The national railway network would come under the authority of the central government. The development of each railway route will be considered in tandem with other policies, such as logistics networks, environmental protection, investment and employment. In the case where there are many routes to develop, the Chinese government will decide based on the highest benefits to the Chinese people. The contractual investment would come from a responsible authority which must create its own plan and seek for investors. The central government plays a role as a supporter through state-owned financial institutions. The stateowned financial institutions will provide support in the form of low-interest loans, for instance, as low as a 2.5 % interest rate. Nevertheless, local governments are allowed to initiate the railway construction in their region, but they will face a higher interest fee from banks. For instance, Shandong province11 has got a loan to contract a railway route for tourism with a 6.5% interest rate.

In addition, China aims to connect its railway system from China with ASEAN countries.

According to the Twelfth Five-year Plan for National Economic and Social Development12, China had designated Yunnan as a center of railway connectivity to bridge the south-western region of China with neighboring countries in Southeast Asia13. Two railway routes have been identified: the 4,000-kilometer route for the Kunming-Yuxi-Laos-Thailand-Malaysia-Singapore line and the 4,760-kilometer route for the Kunming-Dali-Baoshan-Ruili-Myanmar-Thailand-MalaysiaSingapore line. These two routes are part of the connectivity plan under the Belt and Road Initiative 14 . Connecting the south-western region of China to ASEAN countries with railway networks is a challenging policy as it faces many constraints, such as politics, investment, technical standard (size of the railway track) and legislation. However, a Chinese scholar analyzing the situation and strategy for railway connectivity and Thai-China diplomatic relationship 15 suggests that “ China and Thailand can promote their connectivity together by enhancing cooperation, simplifying the procedure of investment, and eliminating the impediment of geopolitics. By this way, the two countries can truly become ‘members of one family’ and a community with a shared destiny.” Furthermore, developing the railway networks to ASEAN countries will benefit the economic development of ASEAN countries. China can also develop rural towns along the railway tracks to support the well-being of the local people, such as the Mengla county in Xishuangbanna16, Jiegao town, or Liuli town17. The railway connectivity plan conforms with the Chinese government policy to develop the western region.

3) The Belt and Road Initiative would be linked to the railway system. Since the announcement of the Belt and Road Initiative 18 by President Xi Jinping, the railway networks connecting China and ASEAN countries have been implemented and progressed into high-speed railway projects in Laos, Thailand, Philippines and Indonesia. The development cooperation is part of the 21st Century Maritime Silk Road which aims to connect Asia, Africa and Europe.

Professor Wang Yiwei states19 that “as ASEAN is located at the crossroads of the maritime Silk Road and is a must-pass area of the route, it will be the top priority for China to develop the new maritime

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Silk Road initiative. With an extensive political foundation and a solid economic foundation between China and ASEAN, the initiative of the 21st-Century Maritime Silk Road is in line with the common interests and needs of both sides.”

The China-ASEAN joint development for the maritime silk road can be summarized from President Xi Jinping’s speech when he stated that “China adheres to building confidence and living in harmony based on mutual trust. China upholds cooperation leading to achievements that will benefit all people” In summary, this overview of the railway policies in connection with other regions has shown that China aims to develop the country with benefits to its neighboring countries so as to enhance development together. As for Thailand, its position on Thai-China railway development policies depends on the concrete implementation of the maritime silk road initiative. More importantly, Thailand and China should respect each other’s right to plan its development strategy so as to provide benefits and solutions for both sides.

Second, China’s railway transportation reform In the past, railway transportation was under the Ministry of Railway of the State Council of the People’s Republic of China. However, the complex bureaucratic administration caused the ineffectiveness of the railway service and management. Thus, in 2013, the Chinese government began to reform the national railway system and administration. Notably, it established the Ministry of Transport with the principle of separating the administration from commercial functions for the benefit of the Chinese people20. On March 10, 2013, the Chinese government announced that the State Railway Administration (SRA) and China Railway Corporation (CRC) will be administered under the Ministry of Transport. This structural reform has led to a better integration in policy implementation and a better planning for other transportation sectors, such as highway, sea and air transportation.

The SRA is responsible for policy and railway system administration, for instance, railway standard, train technology, safety, quality of railway transportation and related projects.

In actual practice, the SRA reports directly its progress of implementation to the State Council of the People’s Republic of China.

The CRC is responsible for commercial functions, for instance, logistics and service businesses, and railway construction.

At present, China is the world’s second longest railway network. It has the longest network of high-speed trains with a total of 112,000 kilometers (65,594 Miles)21. China has 16 routes for its regular railway network, namely, 8 routes from the north to the south and 8 routes from the east to the west. This network creates connectivity between 81 large cities in China. The development of the railway network completed the logistics network for the whole of China22.

When CRC operates its railway system to serve commercial services, it has catalyzed domestic economic advancement, particularly in improving people’s quality of life. Thus, it can be concluded that the railway transportation reform has been successful according to the national strategic plan which emphasizes the use of the railway network as the main transportation system for modernization. It reduces, among other things, the costs for industrialization. In addition, one of the most important aspects of the China’s railway transportation reform is the development of research and innovation in Science and Technology to upgrade and improve the railway system, as detailed below: 3

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1) Science and Technology Innovation Plan During the period from 1950 to 2005, China still used steam, diesel, and electric locomotives in railway transportation. China also constructed railway networks totalling 74,200 kilometers and increased the train speed from 120 kilometer per hour to 200 kilometer per hour. China has been planning to develop high-speed train since 1990 amidst pros and cons for the high-speed train construction. Eventually, Premier Li Peng announced the building of the high-speed train network in 2003. The Ministry of Railway, at that time, chose the shinkansen high-speed train technology from Japan, but it faced demonstrations from the Chinese people. Later in 2005, the Ministry of Railway invited foreign companies, such as, Bambaridier, Alstom, Siemens and Kawazaki to participate in bidding for the use of the 200 kilometer per hour high-speed train technology in China. All companies, except Siemens, won the bid and accepted the condition to transfer high-speed train technology to China 23 .

Eventually, Siemen also joined the bidding a year later and accepted the condition on technology transfer to China. Therefore, China uses large scale business competition and its attractive market for railway construction to enhance its science and technology innovation development. The Chinese Premier emphasized the importance of learning and utilizing advanced technology transfer from foreign countries to create the unique Chinese high-speed train technology. Nowadays, China has 8 routes of high-speed train systems with 4 routes from the north to the south and 4 routes from the east to the west 24 . The speed of the train is between 200 to 350 kilometer per hour and the high-speed train network can accommodate around 1,500 million passengers per year (2016)25.

2) Enhancement of China’s capacity from research management and development to innovation service provider.

From the knowledge transfer by foreign countries, it helps improve China’s capacity to produce its own high-speed train, for instance, the CRH1A, CRH5, and CRH3C. China can produce domestically parts for the high-speed train and increase the average speed of the train. For example, the Beijing – Shanghai route has increased its speed to 380 kilometer per hour in 2007. The year 2014 is the second period of China’s high-speed train technology development as it started to export its technology worldwide. During the same period, there was a major institutional reform. The Chinese government merged the China South Locomotive and Rolling Stock Corporation Limited: CSR and China Northern Locomotive and Rolling Stock Industry ( Group) Corporation: CNR into the China Railway Rolling Stock Group.

Although the cost of high-speed train construction is high, nonetheless it offers a high return for the investment26. High-speed train construction will increase employment, create demands for the integrated economy and inter-city connectivity, encourage the use of clean energy, reduce dependency on petroleum, and support economic growth of cities and towns along the railway.

3) Innovation-led development for railway transportation In 2011, China began to use the online ticket reservation system. But owing to the high traffic volume on the website, it created problems in the ticket booking service and reduced the efficiency of the service, such as faulty booking and failed payment. According to the CRC27, there are two main reasons: first, the existing system was incapable to respond to high volume of demands and second, there was a lack of expertise to handle big data. Thus, the CRC contracted International Integrated System Inc. (IISI)28 to solve the problems. IISI suggested to use the source software called Gemfire to manage big data. After testing the system in January 2012 and October 2012, they found that Gemfire was working well. In 2013, the CRC starts to launch this new operation system. CRC makes the revolutionary decision to change 46

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to the technology responsive to disruption. The case of Gemfire highlights the importance of information technology and big data management in providing services to high demands on railway transportation. Recently, the CRC initiates WeChat Pay and Alipay for high-speed train ticket reservation to provide payment options and to make it more convenient to passengers29.

The Chinese government has been accelerating the capacity and performance of information technology which contributes to economic development as well as political, cultural, social, and military developments30.

In summary, the Chinese government has made a structural reform for the railway transportation institutions. China has solved the problem of centralization in the Ministry of Railway through the initiation of institutional reforms. In addition, it has been involved in the negotiation for technology transfer to advance its domestic technology, and application of information technology innovation. Therefore, China’s policy, reform and administration in railway transportation provides a good example for Thailand to initiate its own national reform in the railway system.

Endnotes

Wisit Dumrongchai. Railway Transportation. Master of Economics, Kasetsart University, 1961, p.5 Public Debt Management Office. (Final Report) Infrastructure Project Evaluation through Productivity and Competitiveness of a Country for a Sustainable Public Debt Management. September 2015 3 The 11st Five-Year Plan for Economic and Social Development (2006-2010) 4 The 12nd Five-Year Plan for Economic and Social Development (2011-2015) 5 The 13th Five-Year Plan for Economic and Social Development (2016-2020) 6 Xi Jinping’s strategy. Reform and opening will only move forward as unfinished agenda (August 31, 1975) Speech by President Xi Jinping as the chairman of the second education committee, the 18 th Politburo Standing Committee of the Communist Party of China. Nonthaburi. Matichon.p. 138-141 7 Mao Baohua and Chen Haibo. (2001) “Sustainability Analysis of Chinese Transport Policy” in International Journal of Sustainable Development and World Ecology, 8(4), pp.323-336 8 Wei Zhou and Joseph S. Szyliowicz. “The Development and Current Status of China’s Transportation System” in World Transport Policy of Practice Volume 12, Number 4 pp.12-13 9 Chen Lufan. Research Fellow Honorary Director of Yunnan Institute of Southeast Asian Studies. Chairman of Yunnan Association for Southeast Asian Studies.

10 Central Committee of the Communist party of China. Recommendations for the 13 th Five-Year Plan for Economic and Social Development. First Edition 2015, Beijing: Central Compilation and Translation Press, 2015, p.21 11 Zhou Fangye, Assoc. Prof. Dr. National Institute of International Strategy. Chinese Academy of Social Science. (NIISCASS) Beijing.

12 Thailand Development Research Institute. Utilization of railway connectivity with neighboring countries for Thailand as center for regional economic and tourism, Thailand Development Research Institute Vol. 96 October 2013, p.15 13 Pan Asia railways has three routes 1. Europe and Pacific route start from Germany-Poland-Belarus-Russia-Kazakhstan-Mongolia 2. Northern Europe and Persian Gulf with three sub-routes 3. Northern Europe and ASEAN with three sub-routes 14 Jia Yanjong, Prof. Chief Editor, MeKong Magazine Yunnan.

15 Liping Xu, Dr. Senior fellow of National Institute of International Strategy (NIIS), Chinese Academy of Social Sciences (CASS) 16 Lisheng Duan, Prof. Center of Thai studies, School of International Studies, Yunnan University.

17 Lei Zhuning, Assoc. Prof. Deputy Director, Yunnan Academy of Social Sciences (YASS) Chinese Academy of South and Southeast Asian Studies (Kunming) 18 “Silk Road Economic Belt” September 2013, Nazarbayeu University, Kazakhstan. “Maritime Silk Road” October 2013, the Asia Pacific Economic Cooperation (APEC) Indonesia.

19 Wang Yiwei. The belt and Road Initiative, What will China Offer the World in Its Rise. New World Press(China), p.25 1 2

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Wang Yukai, Chinese Academy of Governance. http://www.chinadaily.com.cn/china/2013npc/ 201303/10/content_16295025.htm. (15/2/2559) 21 http://en.wikipedia.org/wiki/Rail_transport_in_china 22 Wuyi Zhang, Prof. Deputy Director, Yunnan Logistic Association. Deputy Director, Yunnan Marketing Association.

Kunming University of Science and Technology. (August 2016) 23 http://en.wikipedia.org/wiki/Rail_transport_in_china 24 The four north-south HSR lines: Beijing-Shanghai route Beijing-Guangzhou-Shenzhen-Hongkong route Beijing-Harbin route Hangzhou-Shenzhen route The four east-west HSR lines: Qingdao-Taiyuan route Shanghai-Wuhan-Chengdu route Xuzhou-Zhengzhou-Lanzhou-Urumqi route Shanghai-Hangzhou-Changsha-Fuiyang-Kunming route 25 http://www.chinahilights.com/29 September 2018 26 Zhu Zhenming,Prof. Deputy Secretary General, the China Association for d Southeast Asian Studies, Vice President, Yunnan Association for Southeast Asian Studies. Member of Research Advisory Committee of Mekong Institute.

27 Jiansheng Zhu, Dr, Vice Director of the China Academy of Railway Sciences, 28 http://pivotal.io/big-data/case-study/16/2/2016 29 http://brandinside.asia/30september2018 30 Xi Jinpin’s strategy. Opening Speech for the first meeting of working committee on internet security and information technology (February 27, 2014). Nonthaburi. Matichon.p.231-234 20

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ARCID CHINA POLICY BRIEF 1. Kavi Chongkittavorn, “New Challenges of Thai-China Relations”, Volume 1, No.1, July – August 2018 2. Bilveer Sigh, “The Uighur Issue in Thai-China Relations”, Volume 1, No.2, September – October 2018 3. Somchai Thamsutiwat, “China’s Railway Transportation Policy”, Volume 1, No. 3, November – December 2018

ARCID China Policy Brief Volume 1, No. 3 November - December 2018

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ARCID CHINA POLICY BRIEF 1. Kavi Chongkittavorn, “New Challenges of Thai-China Relations”, Volume 1, No.1, July – August 2018 2. Bilveer Sigh, “The Uighur Issue in Thai-China Relations”, Volume 1, No.2, September – October 2018 3. Somchai Thamsutiwat, “China’s Railway Transportation Policy”, Volume 1, No. 3, November – December 2018

ARCID China Policy Brief Volume 1, No. 3 November - December 2018

China’s Railway Transportation Policy

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