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China Railway Corp expected to raise freight rates

According to South China Morning Post article, the heavily indebted China Railway Corp (CRC) expected to raise freight rates in order to relieve its massive debt burden and speed up market-oriented reform in the industry, which it monopolises. The rail freight rate in China may rise from 0.12 yuan (15.2 HK cents) per tonne per kilometre to an average of 0.15 yuan, which the railway operator said would be “more reasonable”.

CRC was spun off from the former ministry of railways in March last year, taking over the entire assets and debts of the dissolved railway department. A reform in the railway freight sector has since been at the top of its agenda.

Statistics from the National Audit Office show that the new national railway operator was bogged down in debt of 2.9 trillion yuan in June last year, while its total assets were valued at 4.66 trillion yuan.

Meanwhile, a dynamic pricing system would be introduced to freight and passenger services to better reflect market changes and cash in on peak demand, state media reported recently.

China’s rail transport volume is the largest in the world, accounting for 25 per cent of the global total. As the rail network expanded, the country’s annual rail freight volume increased from 2.04 billion tonnes to 3.9 billion tonnes between 2002 and 2012.

The research shows CRC would be able to pay off its debts within seven to 10 years assuming the freight rate rose to 0.13 yuan per tonne per kilometer and annual growth in railway freight and passenger volume remained at 5-8 per cent.

Source* http://www.scmp.com

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