Industrial capacity cuts hit rail cargo, official data show
Even as the government is increasing investment in the transportation sector, freight and passenger use of these facilities is generally weakening. Experts said this situation is largely due to China's industrial glut, and they warned that domestic transportation systems might face even greater pressure in the next few months.
Data from the Ministry of Transport (MOT) showed on Monday that the railways carried 260 million tons of freight in July, down 6.7 percent year-on-year. In the first seven months of 2016, 1.84 billion tons of freight were transported by rail, down 7.4 percent year-on-year.
Liu Dongliang, an analyst at China Merchants Bank, said that rail cargo has been declining for years.
"Usually, industrial bulk commodities are transported by rail. Because of the government's drive to cut excess industrial capacity, it's only natural that rail freight demand is decreasing," Liu told the Global Times on Monday.
He said that since capacity cuts in such sectors as coal and steel were slower than expected in the first half of 2016, the government will increase efforts to carry out its plan in the second half of the year, exerting further pressure on railway freight shipments.
Rail passenger growth also slowed in July, with 270 million trips recorded, a gain of 8.5 percent year-on-year, the MOT data showed. Growth was 12.7 percent in June.
Roads were quieter too: The MOT data showed that 1.32 billion people traveled by highway in July, down 5.4 percent year-on-year, while highway cargo shipments expanded 5.5 percent year-on-year in July, down from the 6.1 percent gain in June.
These slowdowns come as the government spends more on transportation infrastructure. In the first half, rail investment rose 12.7 percent year-on-year to 265 billion yuan ($39.7 billion), the Shanghai Securities News reported on July 23.
According to the data from the MOT, the government invested 860 billion yuan in highway construction from January to July, up 7 percent year-on-year.
In particular, the government's investment in rural highways jumped 2.2 percent.
Zhao Jian, a professor at Beijing Jiaotong University, said the government wants to offset the economic problems associated with curtailing the industrial glut by investing in public transportation, but such measures may have very limited results.
China Railway lost more than 7 billion yuan in the first half of 2016 while having the debt of more than 4 trillion yuan, domestic finance website yicai.com reported on Thursday.
Liu said the government should adjust the scale of transportation investment according to regional conditions.
"In eastern areas, where infrastructure investment is relatively mature and complete, building public transportation infrastructure might easily result in spare capacity. But in some inland areas, there should be no problem with the government encouraging public transportation investment," he noted.
The China Securities Journal reported Monday that the National Development and Reform Commission (NDRC) approved 12 infrastructure projects with an investment of about 284.9 billion yuan in July and August.
The NDRC also approved nearly 800 billion yuan worth of infrastructure projects including rail, highways and urban railways in the first half of 2016, the newspaper said.
The MOT's data also showed that government investment in waterway construction fell 9.5 percent year-on-year to 69.6 billion yuan in the first seven months of 2016.
