The development and status quo of freight transport in China

Chapter 8

The development and status quo of freight transport in China Haixiao Pan, Yuming Zheng Department of Urban Planning, Tongji University, Shanghai, China

Chapter outline 1. Introduction 1.1 Overall change in freight volume 1.2 The relationship between economic development and freight transport development 1.3 Infrastructure construction and policy 1.4 Coal freight by railway 1.5 Ports and containers 1.6 Modern logistics policy

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140 141 143 145 149

2. Experience and lessons 2.1 Ports’ heavy dependence on roads 2.2 Road freight company is small, multiple, scattered, and weak 2.3 High social logistics costs 2.4 Urban freight policy 3. Current policy 4. Future prospects References Further reading

150 150 152 154 156 158 159 160 161

1. Introduction In the past four decades, freight transport in China has been greatly improved. The total freight volume has increased from 3.19 billion tons to 43.87 billion tons. The turnover has increased from 992.8 billion tons to 186,629 billion tons. Both transport capacity and efficiency have improved a great deal. In addition, China’s freight structure has undergone major changes. The railway took more than 35% of the market share in freight transport before 1984. However, as the Ministry of Transport put forward the slogan “Roads Shared by Everyone,” the self-employed freight transport service providers entered the road transport market. Meanwhile, infrastructure such as highways developed remarkably fast, contributing to the rapid increase in road freight and its substitution of railway freight. By 2016, road freight had taken an Urban Freight Transportation Systems. https://doi.org/10.1016/B978-0-12-817362-6.00008-2 Copyright © 2020 Elsevier Inc. All rights reserved. Published in cooperation with WCTRS.

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absolute advantage in the market. Railway freight was less than 10% of the market, and road freight was nearly 80%. In terms of water transport, the cargo throughput of major coastal ports in China was less than 200 million tons in 1978, but this figure increased to 8.1 billion tons in 2016, a 40-fold increase. Among the top 10 container ports in the world in 2016, 7 were ports in China, with Shanghai Port ranking the first. Overall, China’s freight development has shown a great upward trend. The purpose of this chapter is to sort out changes in freight development, to summarize the experiences, and to look forward to the future.

1.1 Overall change in freight volume The freight volume, freight turnover, and average freight distance from 1978 to 2016 are shown in Figs. 8.1e8.3. The change in freight volume can be divided into a slow-growth period (1978e99), a rapid-growth period (1999e2012), and a stable period (2012euntil now); the change in turnover can be divided into a slow-growth period (1978e2003), a rapid-growth period (2003e13), and a volatility period (2013euntil now). The change of the freight distance is more complicated, and the fluctuation is more severe. In general, there are two obvious growth periods. The first growth period is from 1985 to 2000, when the freight distance increased from 250 to 350 km. The second growth period is from 2000 to 2007, when the freight distance increased further, from 350 to 450 km. After 2007, the average distance entered the fluctuation period, showing a slow downward trend.

5000000

Freight Volume (10000 t)

4500000 4000000 3500000 3000000 2500000 2000000 1500000 1000000 500000 0 1975

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1985

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1995

2000

2005

2010

2015

2020

Years FIGURE 8.1 Freight volume (10,000 t). The data source is National Bureau of Statistics http:// data.stats.gov.cn/.

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Freight Turnover (100 million t·km)

200000 180000 160000 140000 120000 100000 80000 60000 40000 20000 0 1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

Years FIGURE 8.2 Freight turnover (100 million t$km). The data source is National Bureau of Statistics http://data.stats.gov.cn/.

The freight transport distance by mode is displayed in Fig. 8.4. From the top to the bottom are air transport, water transport, railway transport, and road transport. The freight distances of different transport modes show different trends. Since 1978, the air freight distance has been steadily increasing. The average freight distance reached as high as 3000 km by 2016, which means the transport of high-end products in China is even more extensive now. The water

Average Distance of Freight Transport (km)

500 450 400 350 300 250 200 150 100 50 0 1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

Years FIGURE 8.3 Average distance of freight transport (km). The data source is National Bureau of Statistics http://data.stats.gov.cn/.

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1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

0

average transportaon distance of railway(km) average transportaon distance of highway(km) average transportaon distance of waterway(km) average transportaon distance of civil aviaon (km)

FIGURE 8.4 Freight transport distance by mode. The data source is National Bureau of Statistics http://data.stats.gov.cn/.

transport distance has undergone a process of increase and then decrease. The current water transport distance is equivalent to that of the 1980s. Although the average railway freight distance did not change much, it has recently declined. The average road freight distance suddenly increased from 69 to 171 km in 2008, and it has remained stable from that time. China’s total freight volume is steadily increasing, but there are still differences between the four transport modes. For a long time, the structure of China’s freight transport showed a trend of continuous growth of highways, continuous decline of railways, and smooth development of water transport. Railway freight volume reached a peak in 2013 and then declined year by year. However, the volume of the other three modes of transport is still growing. In 2016, the freight volume of railways, highways, waterways, and civil aviation was 3331.86 million tons, 33,412.59 million tons, 6382.38 million tons, and 668 million tons, respectively. Among them, highway accounted for 76%, having an absolute advantage in the market, whereas highway freight volume accounted for only 46% of the total in 1980, which shows a gradual expansion in the market share of highway and a decrease in that of railway and waterway. These trends can be clearly seen in Fig. 8.5. In addition, Fig. 8.5 shows that the proportion of highway freight increased sharply to 73.5% in 1985. This is because the Ministry of Communications put forward the slogan of “Roads Market Shared by Everyone” in 1984, calling on individuals to enter the market of road transport industry. It strengthened the market’s competitiveness and increased the freight transport capacity of the highway.

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100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 railway

highway

waterway

FIGURE 8.5 The proportion of freight volume by mode. The data source is National Bureau of Statistics http://data.stats.gov.cn/.

The reason for railway freight’s continuous decline recently is worth exploring. To sum up, the reasons can be mainly attributed to the following three points: 1. Too Dependent on “Black Goods” Railway freight is divided into “black goods” and “white goods.” “Black goods” refers to large raw materials, such as coal and steel, whereas high value-added goods are known as “white goods.” A recent study (Zhao, 2017) shows the demand for coal has been declining year by year. For example, compared with 2014, the volume of railway coal transport decreased by 290 million tons in 2015, down by 12.7% year on year. This has led to a significant drop in the national railway freight volume. 2. The Institutional Mechanism Needs to Be Improved Wei et al. (2015), concluded that the mechanism needs to be improved. First, the railway freight handling procedures are too complicated. The process of railway freight transport is as follows: reporting plans, accepting waybills, and organizing incoming goods distribution and loading. The procedures are cumbersome and have long cycles. With improved procedures, the goods would be transported as soon as they arrived, and the procedures would be completed on the spot when it comes to the road freight market. In addition, the freight transport capacity of the railway is controlled by the government and cannot be flexibly regulated according to market conditions. Finally, the assessment indicators are still centered on production, regarding “loading, unloading, and arranging” as the main evaluation indicators and focusing on

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production metrics, such as tonnages loaded and sent. Thus, the institutional mechanism is obviously not in line with the requirement to change the management mode from internal production-oriented to market-oriented. 3. The Imbalance of Railway Transport Capacity Wang (2013), argued that the imbalance of railway transport capacity is one of the reasons for railway freight’s decline. The supply imbalance is reflected in two respects. On one hand, the demand does not match the railway transport capacity. The main growth areas of the freight sources are concentrated in the northwest, the northeast, and North China, and the goods are mainly transported to the southwest, the southeast, and East China. The capacity of the railway is almost saturated along that corridor, which constrains the transformation from potential goods to real cargo (Wang, 2013). On the other hand, the development of freight and passenger transport is unbalanced. Although the number of freight cars and passenger cars is increasing year by year, compared with passenger cars, the proportion of freight cars is decreasing. With the outbreak of high-speed railway construction, the passenger turnover rate greatly improved, which allows railway passenger transport to take some advantage in the competition of intercity passenger transport.

1.2 The relationship between economic development and freight transport development First, we explore the relationship between the growth rate of GDP and that of different transports’ freight volumes. Fig. 8.6 shows the data in a 5-year

200% 180% 160% 140% 120% 100% 80% 60% 40% 20% 0% 1995

2000

2005

2010

2015

-20%

railway freight volume

highway freight volume

civil aviaon freight volume

GDP

waterway freight volume

FIGURE 8.6 Freight volume and GDP growth rate of various freight methods.

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interval. It can be seen that the relationship between the growth rate of freight volume and GDP growth is not linear. After the year 2005, highway freight increased much higher compared with railway freight. By dividing the growth rate of each mode of freight volume by the growth rate of GDP, we can get the elasticity of economic growth for each mode of freight. If freight volume growth rate is greater than GDP growth rate, it may imply that China’s current industrial structure is still dominated by heavy industry, which means we need a large number of raw materials for production. The result is shown below. Because the road freight volume accounts for the majority of the total freight volume, the trend of total freight volume is similar to that of road freight. It can be seen that the elasticity of GDP to freight volume first increases and then decreases, that is, the raw freight materials contributing to economic growth have declined to a certain extent, representing the effect on the adjustment of China’s industrial structure. Although both rail and water transport mainly deal with bulk cargo, the two have different trends recently. The elasticity of water transport is significantly higher than that of railways, which means there is still a large demand for China’s transnational bulk cargo, and the demand for coal and raw materials, the railway freight, remains stable or declining (Fig. 8.7).

1.3 Infrastructure construction and policy This section focuses on the infrastructure of highway and railway. Fig. 8.8 shows the growth rate of highway and railway infrastructures. It can be seen that the freeway develops most rapidly. From 1990 to 2000, the network length 2.5 2 1.5 1 0.5 0 1995

2000

2005

2010

-0.5 railway freight

highway freight

waterway freight

civil aviation freight

FIGURE 8.7 Freight growth rate divided by GDP growth rate.

2015

142 PART | II Logistics concepts and urban freight transportation 14 12 10 8 6 4 2 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

0

Railway network length (1000km)

Freeway network length (1000km)

High speed highway network length(1000km)

FIGURE 8.8 China infrastructure construction. The data source is National Bureau of Statistics http://data.stats.gov.cn/.

of freeway constructed increased from 0.69 million km to 16.3 million km. The annual growth rate of freeway miles constructed was basically above 20%, but railway mileage showed almost no change. The average annual growth rate of railway electrification mileage is more than 5%. This is probably because the main task of the railway during this period is to improve the capacity of existing railways, which results in less construction of new railways. As time goes by, the growth of freeway network length slowed down while that of railway accelerated relatively with the introduction of the high-speed railway. Therefore, we can relinquish more capacity of the normal-speed railway to freight. Meanwhile, the development of freeways reached a bottleneck. Fig. 8.9 shows the freight tonnage per kilometer by railway and highway, which represents the loading efficiency of road freight and railway freight. 50000 45000 40000 35000 30000

Railway freight volume per kilometer(t/km)

25000 20000

highway freight volume per kilometer(t/km)

15000 10000 5000

FIGURE 8.9 Chinese freight transport Intensity.

2016

2015

2014

2012

2013

2011

2010

2009

2008

2007

2005

2006

2004

2003

2002

2001

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1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

0

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From the chart, it can clearly be seen that although the road freight proportion is far greater than railway freight, the tonnage of freight transported per kilometer of road is significantly lower than that of the railway. In other words, the railway freight can accomplish more tasks with less network size and higher efficiency. From the perspective of the change of freight tonnage per kilometer, the railway freight load was relatively stable before 2000, but it rose rapidly after 2000 and reached its peak around 2008. During this period, although the length of railway line increased slowly, the freight tonnage increased rapidly. With the decline of railway freight volume, railway freight volume per kilometer quickly dropped to 32,000 t/km. Nevertheless, road freight has been in a stable state; the increase of network length can be matched with the growth of highway freight tonnage.

1.4 Coal freight by railway Fig. 8.10 shows that 1990e99 was a stable period when the freight volume of coal kept stable, and 1999e2011 was a rapid growth period when the freight volume of coal increased from 649.71 million tons to 1721.25 million tons (an increase of about two times). However, during the recession from 2011 to 2016, coal freight volume was falling every year. The specific characteristics of coal freight transport are analyzed below. First, China’s coal-producing regions and consumption regions are mismatched. As shown in Fig. 8.11, China’s coal-producing areas are mainly located in northern China, while the consumption is concentrated in the

Railway Coal Freight Volume 10000t

200000 180000 160000 140000 120000 100000 80000 60000 40000 20000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

0

FIGURE 8.10 Railway coal freight volume. The data source is National Bureau of Statistics http://data.stats.gov.cn/.

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FIGURE 8.11

Distribution of coal freight volume (Wang and Ducruet, 2014).

eastern coastal areas of China, which will inevitably lead to a large demand for coal transport. Fig. 8.12 shows the coal transport (railway) and its freight volume toward and away from Beijing. It can be used to analyze the spatial distribution characteristics of coal freight. It can be seen that coal transport is concentrated in eastern and central China (North China and Central Plain). The coal railway network mainly focuses on areas such as Shanxi and Henan and transfer coal to the east and south, forming an actual corridor. In general, the railways connecting the ports belong to the main corridors, and most of the lines are

FIGURE 8.12 Spatial Pattern of rail-sea coal transport in China (2012). N.B. Rail-up accounts for toward Beijing, rail-down for from Beijing (Wang and Ducruet, 2014).

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exclusively dedicated (Daqin line for heavy haul railway for coal) or take a leading role (Jinghu, Beijing-Shanghai Railway, and Jingguang, BeijingGuangzhou Railway account for about 57%) or are significant to coal traffic (more than 30%). China’s coal is not only transported by rail but also uses railway-sea combined transport. It is estimated that 70% of coal transport depends on railways, 25% of coal transport relies on rail and water transshipment, and 5% relies on water transport. Fig. 8.13 shows the spatial distribution of railway transport and rail and water transshipment. It can be seen that a large amount of coal needs to be transferred from central Shanxi, central Hebei, and eastern Shanxi. Because of limited railway capacity, coal in western Shanxi cannot be exported. New railway lines from Lvliang to Rizhao Port should form new coal transport corridor.

1.5 Ports and containers This section mainly discusses the development of container ports. Water transport is an important way to transport bulk cargo. Using containers in water transport can not only improve the efficiency of loading and unloading but also effectively promote the development of multimodal transport. Thus, the importance of containers for water transport is self-evident.

FIGURE 8.13 Spatial Pattern of coal transfer by rail and rail-water combined systems (Wang and Ducruet, 2014).

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First of all, we need to understand the changes in container throughput in ports. Fig. 8.14 shows China’s container throughput from 1979 to 2011. It can be seen that in the 1980s, China’s port container transport was still in its infancy, whose total volume was very low and growing slowly. China’s port container throughput increased rapidly since the 1990s and reached more than 160 million twenty-foot equivalent units (TEU) in 2011. In addition, the trend of China’s port container throughput clearly reflects the close relationship between container transport and economic and trade development. The world economy was booming before 2007; the annual growth rate of China’s container throughput was basically above 20%. However, the international financial crisis in 2008 made China’s foreign trade imports and exports suffer. The growth rate of container port throughput dropped from 21.8% to 12.6% in that year. Moreover, with the further impact of the international financial crisis on China’s real economy, China’s container port throughput fell for the first time in 2009. Driven by the growth of domestic demand, China’s container port throughput finally rebounded in 2010. Next, we will explore the current situation and development trend of n P n China’s ports. If Ri is the discrete degree of goods, then Ri ¼ n1 ðtj  t Þ, j¼1

where tj represents the proportion of port j cargo throughput to total throughput. Wang et al. (2018) call ports with Ri greater than 0.3 as special ports, those with Ri greater than 0.2 and less than 0.3 are called general ports, and those with Ri less than 0.2 are called comprehensive ports. Special ports are mainly 30000 25000 20000 15000 10000 5000 0 2001 2003 2005 2007 2008 2009 2011 2012 2013 2014 2015 2016 2017 total throughput\ten thousand TEU FIGURE 8.14 China’s container throughput in 1979e2011 years. The data source is Statistical bulletin on the development of the transportation industry by Ministry of transport of the People’s Republic of China http://zizhan.mot.gov.cn/zfxxgk/bnssj/zhghs/201803/t20180329_3005087.html.

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Qinhuangdao (0.75), Huanghua (0.65), Shanwei (0.64), Shenzhen, Weihai, and Huizhou. General ports are mainly Haikou, Basuo, Dongguan, Qingdao, and Rizhao. Comprehensive ports are mainly Zhuhai (0.19), Quanzhou (0.19), Taizhou (0.18), Ningbo (0.18), Ningde (0.18), and Shantou (0.17). Their distribution is shown in Fig. 8.15.

FIGURE 8.15 Distribution of comprehensive, general, and professional ports (Wang et al., 2018).

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Through the discrete index of goods, we can judge the comprehensiveness and specialization of port transport. Fig. 8.15 shows a map of the spatial distribution of various ports. From the perspective of spatial distribution, specialized ports are concentrated in the Pearl River Delta and the Bohai Rim region. Among them, there are seven specialized ports, accounting for about 14.3% of the total port. Coal transport has become the core element of the formation of specialized transport functions in China’s coastal ports. Coal is the main cargo of Qinhuangdao, Huanghua, Shanwei, and Yangzhou, and it accounts for more than 80% of the total throughput of the port except for Yangzhou. They are absolutely specialized coal ports. Shenzhen and Weihai specialize in other goods, accounting for more than 75%, while Huizhou specializes in oil. The main cargoes in coastal ports include coal, metal ore, mineral construction materials, petroleum, nonmetallic ore, steel, wood, and other types of goods. Among them are 28 coastal ports mainly for coal, accounting for 57.14% of the total number of coastal ports. The number of ports whose main cargoes are metal ore, mineral construction materials, and petroleum is 14, 13, and 7, respectively. There are a few ports with other goods as their main cargo. For example, nonmetallic ore is the main cargo in Yantai, Beihai, and Zhangzhou. The distribution of major cargoes in coastal ports has different spatial characteristics. Ports with metal ore as the main cargo are concentrated in the Bohai Rim region. Ports focused on mineral construction material (except Dandong Port in the northeast of China) are distributed in the south of the Yangtze River, especially in the southeast coastal port group. Ports with oil as the main cargo are located in the south of the Yangtze River, concentrated in the Pearl River Delta and the southwest coastal areas. There are currently three development trends in China’s container port transport: 1. Terminal capacity is larger than current demand, but freight demands are growing strongly. 2. Zhang (2012), concluded that the layout of the port tends to be reasonable. First, dry ports are constructed and a multimodal transport network is established, thereby expanding the port hinterland and increasing the supply of containers. Second, feeding ports are also established. Third, orderly competition is carried out and the dialog and cooperation between adjacent ports is strengthened through asset sharing. 3. Multimodal transport has great potential for future development. Li (2018), has proposed that China’s current rail and water transshipment still shows low performance. The proportion of railway container freight to railway freight is less than 10%, far lower than 30% in developed countries. Through sea-rail combined transport, higher freight efficiency and lower prices can be achieved.

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1.6 Modern logistics policy Modern logistics is the general trend in freight development. Under this trend, China has successively introduced corresponding policies to support the construction of logistics parks. These policies are detailed below. Guo et al. (2012), found that China’s first logistics park was Shenzhen Pinghu Logistics Base. It was established on December 1, 1998. In 2006, the number of logistics parks (bases) in China grew to 207 and later 475 in 2008. According to the “Fifth National Logistics Park (Base) Survey Report” released in 2018, there are 1638 logistics parks in China. Construction of logistics parks is still growing rapidly. Analyzing from 2015, the average annual growth rate is 10.7% (The Fifth National Logistics Park (Base) Survey Report, 2018). From these data, we can see the trend of the vigorous development of China’s logistics park construction. Wang (2017), found that the earliest policy that mentioned modern logistics is Several Opinions on Accelerating the Development of Modern Logistics in China. It was issued jointly by six ministries and commissions in 2001. It mentions that “China’s modern logistics is in its infancy” and expresses the belief that modern logistics will become an important tertiary industry and a new economic growth focus. Subsequently, there is a section specifically intended to vigorously develop a modern logistics industry in the Eleventh Five-Year Plan, issued in 2006, which requires the cultivation of professional logistics enterprises and the active development of third-party logistics. China should establish a logistics standardization system, strengthen the development and utilization of new logistics technologies, and promote logistics informatization. Moreover, the nation should strengthen the integration of logistics infrastructure, build largescale logistics hubs, and develop regional logistics centers. More planning priority should be given to encourage logistics parks, especially large-scale logistics hubs. In December 2008, the State General Administration of Customs, the Ministry of Finance, the State Administration of Taxation, and the State Administration of Foreign Exchange jointly issued a document to formally approve the establishment of 17 bonded logistics centers such as the Shanghai Northwest Logistics Park. This approval further promoted the development of the domestic logistics park. On June 8, 2011, the State Council convened an executive meeting to deploy the work of promoting the healthy development of the logistics industry and put forward eight policies to promote such development. These eight measures are widely referred to by the industry as “National Eight Articles” to promote the rapid and healthy development of the logistics industry. Article 2 proposes to increase the support for the land policy of the logistics industry. Besides that, it emphasizes scientifically formulating the

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development plan of the logistics parks and giving priority to providing land for the industry. In September 2013, the National Development and Reform Commission and 12 other Ministries jointly issued the National Logistics Park Development Plan. According to the logistics demand and the importance of the logistics park in national strategy and industrial layout, 29 cities were listed as firstlevel node cities, and 70 cities were listed as second-level node cities for logistics. The result of this survey shows that 652 of the 1113 logistics parks in China are located in level-one and level-two node cities, accounting for 58.6% of the total; the average number of logistics parks in each level-two node city is 6.6, which is much higher than the 1.9 logistics parks in the cities below level two. This reflects the guiding role of national planning and the agglomeration effect of node cities. A list of node cities can be found in Tables 8.1 and 8.2.

2. Experience and lessons 2.1 Ports’ heavy dependence on roads In a recent study, Chen (2017), argued that water-and-water transshipment and road-and-water transshipment account for a large portion of the port enterprises’ cargo and container throughput. Rail-and-water transshipment accounted for a relatively small amount.

TABLE 8.1 Number of railway passenger cars, freight cars, and EMUS (electric motor train units) in 2010e16.

Time

Passenger cars (10,000 vehicles)

Freight cars (10,000 vehicles)

EMUs (10,000 vehicles)

Freight/ Passenger cars

2010

5.21

62.2

0.44

11.9

2011

5.28

64.9

0.68

12.3

2012

5.77

67.1

0.86

11.6

2013

5.88

68.8

1.05

11.7

2014

6.06

71

1.37

11.7

2015

6.5

72.3

1.76

11.1

2016

7.1

76.4

2.07

10.8

Zhao, J., 2017. Study on current status of railway freight industry in China and its transformation toward modern Logistics. Logistics Technology, 36 (08).

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TABLE 8.2 List of node cities. Level-one node cities (29) Beijing, Tianjin, Tangshan, Hohhot, Shenyang, Dalian, Changchun, Harbin, Shanghai, Nanjing, Suzhou, Hangzhou, Ningbo, Xiamen, Jinan, Qingdao, Zhengzhou, Hefei, Wuhan, Changsha, Guangzhou, Shenzhen, Nanning, Chongqing, Chengdu, Kunming, Xi’an, Lanzhou, and Urumqi Level-two node cities (70) Shijiazhuang, Handan, Qinhuangdao, Cangzhou, Taiyuan, Datong, Linfen, Tongliao, Baotou, Ordos, Anshan, Yingkou, Jilin, Yanbian (Hunchun), Daqing, Mudanjiang, Qiqihar, Wuxi, Xuzhou, Nantong, Taizhou, Lianyungang, Wenzhou, Jinhua (Yiwu), Zhoushan, Jiaxing, Huzhou, Anqing, Fuyang, Maanshan, Wuhu, Fuzhou, Quanzhou, Nanchang, Ganzhou, Shangrao, Jiujiang, Yantai, Weifang, Linyi, Heze, Rizhao, Luoyang, Nanyang, Anyang, Xuchang, Yichang, Xiangyang, Yuyang, Loudi, Henyang, Foshan, Dongguan, Zhanjiang, Liuzhou, Qinzhou, Yulin, Guigang, Haikou, Mianyang, Dazhou, Luzhou, Guiyang, Lhasa, Yulin, Baoji, Xianyang, Xining, Yinchuan, and Yili (Horgos)

According to relevant statistics, roads account for about 85% of the national container collection/distribution and transport volume, waterways account for about 14%, and railways account for only about 1%. It can be seen that China’s current port collection and distribution development is unbalanced, relying too much on highway transport, and the proportion of railway and waterway transshipment is low. Fig. 8.16 shows that the proportion of rail-and-water transshipment in China’s ports is low, and the proportion of these ports whose throughput exceeds five million TEU is seriously insufficient. Although the proportion of rail-and-water transshipment in some small ports is very high, the proportion in the main ports is much lower than that of advanced ports in other countries. A recent study (Fang, 2016) shows the proportion of rail-and-water transshipment of ports in Shanghai is much lower than around 7% in the Port of Rotterdam, 17%e20% in the Port of Hamburg, 15% in the Port of Antwerp, 25% in the Port of Los Angeles, and 10% in the Port of New YorkeNew Jersey. There are four main reasons for the low proportion of railway transit: 1. High price of sea-rail transport. 2. Lack of an effective coordination mechanism for sea-rail transport. 3. Imperfect network system of sea-rail transport and lagging construction of hardware and software infrastructure. 4. Small size and sparse distribution of companies handling sea-rail transport.

throughput \ten thousand TEU

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China rail and water transshipment volume is 2.1 million TEU

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1000 5

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container throughput

the percentage of rail and water transshipment

FIGURE 8.16 Container throughput and rail and water Transshipment Ratio of main ports in 2014 (Fang, 2016).

On August 31, 2008, the General Office of the Ministry of Transport issued a 3-year action plan to further promote the development of multimodal transport in the Yangtze River Economic Belt. The plan proposes that the railway entry rate of the major ports of the Yangtze River Economic Belt will reach over 80% by 2020. Besides that, the proportion of bulk railways and water freight should be more than 90%, and the average volume of rail-water combined container transport should increase by more than 15% annually. It further proposed that China should strive to make the proportion of direct ocean-inland waterway container transport to reach 20%. The plan stated that before the end of 2018, coal to the main coal port should be transported principally by railway or waterway. Before the end of 2019, long-distance transport of bulk cargo such as ores and coke to and from the main port should be transported principally by rail or waterway.

2.2 Road freight company is small, multiple, scattered, and weak “Small, multiple, scattered, and weak” refers to the characteristic of the road freight market: the large-numbered, small-scale, loose organizational structure and weak strength of enterprises. According to the 2016 China Road Transport Development Report, the number of business owners engaged in road freight was 6.791 million. The average number of trucks owned by each road freight business owner was 1.99%, and 85.5% of the freight enterprises owned less than 10 vehicles. These data indicate that China’s current road freight industry is mainly based on self-employed status holders and holds many enterprises with few vehicles.

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The following figure shows the proportion of road transport enterprises of different scales in various types of road freight. Enterprises owning less than 10 vehicles are dominant in road freight transport except for dangerous goods transport, which has high professional requirements. In addition, the number of enterprises with more than 50 vehicles is a minority in all types of transport, which further reflects the situation of China’s road freight (Fig. 8.17). Comparing the number of vehicles per company in different provinces, the average number of vehicles in road transport enterprises in the eastern economically developed regions is relatively higher than that in the central and western regions. Among them, enterprises in Tianjin and Shanghai are the largest. Therefore, economic development promotes the large-scale development of road freight enterprises to some extent. Qin (2018) shows the disadvantage of small, multiple, scattered, and weak road freight. Because of the asymmetry of enterprise strength, the decentralized operation, the lack of scientific planning, the low management efficiency, and the high-vacancy load rate, the labor cost, fuel cost, and time cost are increased. At the same time, due to the obvious asymmetry of strength and the impact of various market barriers, it is difficult for road freight to carry out multimodal transport practice with the railway, aviation, water transport, etc. Finally, there is still controversy in academia about whether the current state of road transport needs to become an oligopoly. The existing research results mainly reflect two opposite aspects. First, a study (Gu, 2014) shows that road freight enterprises should have an obvious characteristic of scale economy. Second, road freight enterprises do not have an obvious characteristic of scale economy. Although enterprises do not have this characteristic, the freight industry does manifest and is manifested as the network economy. The scale

Dangerous goods transport

Large objecttransport transport Large truck

Container transport

Cargo special 0

10000

20000

30000

40000

50000

Enterprise's vehicle number ≥100

50≤Enterprise's vehicle number ≤99

10≤Enterprise's vehicle number ≤49

Enterprise's vehicle number<10

FIGURE 8.17 The scale of enterprises in China’s road transport industry (MOC, 2016).

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economy represents the monopoly model, which is better than the mode of “small, multiple, scattered, and weak.” However, according to the Ministry of Transport’s Action Plan for Promoting the Healthy and Stable Development of the Road Freight Industry (2017e20), the structural contradictions such as “multiple, small, scattered and weak” have become increasingly prominent over the long term. The capacity is relatively surplus. Besides this, business operators are heavily burdened with respect to administrative approval and various costs, including high tolls and fines. Chinese officials recognize the situation more and consider that the current situation of “multiple, small, scattered and weak” should be ameliorated.

2.3 High social logistics costs In recent years, China’s logistics industry has maintained a steady and rapid growth trend. The total logistics costs have continued to increase; compared with that of the United States, the logistics cost of China is high. Mu (2011), shows that from 1991 to 2010 logistics costs account for about 20% of GDP in China while logistics cost account for about 10% of GDP in the United States. It illustrates that the logistics industry in the United States is relatively mature. The proportion of logistics costs to GDP has stabilized at around 10%, while the cost proportion of GDP in China has reached 18%, almost twice that of the United States. Therefore, discovering the reasons for the high cost of logistics in China and the solutions is of great significance to Chinese enterprises. Cai (2012), has proposed that the total logistics cost mainly includes three parts: transport expenses, storage expenses, and management expenses. Table 8.3 shows the composition of social logistics expenses between 2004 and 2011. The data show that the proportion of transport expenses to total social logistics costs is above 50%, which means the cost of transport has an important impact on logistics costs. In terms of transport costs, roads are the main component because they are the dominant mode of transport. As already known, the price of goods transported by road is the highest compared with railway and water. What’s more, the transport structure based on road freight in China determines the transport cost is bound to be high. Because of the low concentration of the domestic road freight market, the backward transport organization, and the low degree of informatization integration, domestic road freight transport has long been rather inefficient. A recent study (Chang and Chen, 2013) shows that compared with professional transport companies in developed countries, the actual loading rate of domestic trucks is about one-third lower, and the average daily driving distance is only about 33%e50% of that of developed countries. A large number of empty trucks make it difficult to improve the efficiency of transport.

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TABLE 8.3 The Composition of commercial Logistics Expenses in 2004e11(Chang and Chen, 2013).

Year

Total cost of commercial logistics/Trillions

Transport cost/Trillions

The proportion of transport cost to total logistics cost/%

2004

2.91

1.65

56.90

2005

3.38

1.86

55.00

2006

3.84

2.10

54.70

2007

4.54

2.47

54.40

2008

5.45

2.87

52.60

2009

6.08

3.36

55.30

2010

7.10

3.80

53.50

2011

8.40

4.40

52.40

From the perspective of enterprises, a study (Mu, 2011) shows that there are four reasons for the high cost of logistics: 1. Lack of a logistics item in the financial management of enterprises. 2. High empty load rate, large storage volume, and high storage cost. 3. Low degree of informatization integration and little attention paid to the processes of commodity distribution, circulation, and processing and the informatization transformation by enterprises. 4. Lack of control of logistics cost. From China’s perspective, besides the level of economic development and industrial structure Cai (2012), has proposed that the reasons for the rise of logistics costs include the following: 1. The unbalanced industrial distribution and the absence of industrial clusters. 2. The insufficient capacity of logistics infrastructure and lack of an established comprehensive transport system with a reasonable layout, smooth connection, and high efficiency and convenience. 3. Higher road toll, excessive fines, and restricted access to vehicles. 4. Inability of logistics technology, personnel training, and logistics standards to meet demand. However, the impact of industrial structure on logistics costs should also be admitted. The higher the proportion of the secondary industry, the higher the commercial logistics costs. In 2009, the proportion of the secondary industry in China’s GDP was 46.3%, whereas in the United States, it was less than 20%.

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It is understandable that the logistics cost in China is higher than that in the United States. With regard to the reduction of logistics costs, the fundamental problem also relates to the adjustment of the industrial structure.

2.4 Urban freight policy In 2017, the business volume of express delivery service enterprises above designated size reached 40.06 billion pieces, and the daily business volume of express delivery exceeded 109.74 million pieces1. Between 2010 and 2017, the total social logistics volume of the country climbed from 125.4 trillion yuan to 252.8 trillion yuan, achieving 10.53% of the year. With the compound growth rate, the demand for social logistics is seen to be generally on the rise 2. Express delivery services are the most closely related to our daily life. In recent years, China’s express food delivery industry has developed rapidly. Express delivery serves more than 200 million customers per day. The demand for urban logistics continues to increase, but most of the services are carried out by electric two-wheelers. The income of an express delivery provider is usually proportional to the number of goods received and delivered. Driven by the benefits, many express delivery providers put traffic safety behind them, bringing great hidden dangers to road traffic. In view of this situation, the Transportation Administration Bureau of the Ministry of Public Security, together with the China Logistics and Purchasing Federation, convened a national video conference on March 26, 2008. They issued a joint proposal to urban logistics organizations and enterprises to strengthen the management of electric bicycles in urban logistics. But at present, there is no special law to manage express delivery or takeout distribution, and the illegal operation cost of electrical two wheels is low, resulting in many conflicts in road traffic. Here, we sort out the current urban freight policy in China and pick 31 cities with a high economic development level (3 municipalities directly under the central government, 10 sub-provincial cities, and 18 prefecture-level cities, accounting for 38% of the GDP of the whole country) as representatives. Yang (2017), has proposed that urban freight policy can be divided into three main categories: 1. Urban Admittance Qualification Management In 31 large cities, freight companies have to be granted truck passes by the authorities. Traffic management authorities issue the following three types of freight vehicle passes: light minivan passes with a small share of urban road traffic resources, regular passes that are easy to supervise, and a special pass to guarantee the supply and low cost for people’s livelihood. 1. 2017 Statistical Bulletin of the development of the transportation industry. (2018). Retrieved from http://zizhan.mot.gov.cn/zfxxgk/bnssj/zhghs/201803/t20180329_3005087.html 2. Analysis on the status Quo and development trend of China’s logistics industry in 2018. (2018). Retrieved from http://www.chyxx.com/industry/201804/627420.html

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2. Classification Management Measures of Wayleave Truck passes in different cities are marked with freight vehicles’ travel time and driving range. Cities in China generally adopt management measures called a “three-division combination” (combine time, area, and vehicle type) to limit trucks’ right of way. There are more restrictions placed during rush hours on medium and heavy trucks in city centers. The time and limited areas are gradually expanded. Small trucks are encouraged to transport at night to reduce traffic hazards in central urban areas. 3. Technical Management Measures for Freight Vehicles Cities first choose special freight vehicles that meet the technical requirements. Most cities use national standards. Some cities, such as Shanghai, have made their own standards. At present, the main guidance of urban freight policy is to give priority to passenger transport. Freight transport is restricted both in time and space. Urban managers hope to use these policies to minimize the impact of urban freight on urban passenger transport. But in fact, the effect may be unsatisfactory. Shi and Hong (2015), have proposed these reasons: l Passenger vehicles, such as minivans, have become the main vehicles for urban distribution, but the efficiency of these vehicles is not as good as that of large trucks, causing an increase in urban logistics distribution vehicles and aggravating urban congestion. l The current urban freight traffic management policy makes it difficult for trucks to drive through cities and directly increases the cost of urban logistics distribution. This is due to the increase of idle vehicles and labor costs. Aiming at the problems existing in urban freight transport, Hu (2013), has proposed five countermeasures: l During peak periods, establish special parking spaces for distribution vehicles in some spots adjacent to commercial facilities and high logistics demand areas. Use the road space of bus lanes by freight vehicles in off-peak periods to facilitate delivery service in the off-peak periods. l Expand the number and scope of vehicle passes issued in urban areas. l Encourage enterprises to implement night distribution. It is an important measure for rational allocation of road resources in big cities for freight transport to be carried mainly at night and supplemented by day. l Promote the development of consolidated urban distribution, and encourage logistics enterprises to integrate their resources together. l In city centers, there are many restrictions for traffic, which make delivery service inconvenient. When operators tend to receive more tickets, their logistics costs increase. Traffic management should also take into account the narrowness of roads when considering urban delivery services.

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3. Current policy By analyzing policy documents closely related to freight transport since 2017, we can find that the policies mainly focus on three aspects: 1. Environmental protection and energy-saving requirements: the State Council’s announcement on issuing the 3-year action plan to win the BlueSky Defense, the Ministry of Transport’s announcement on comprehensively strengthening ecological environment protection and resolutely fighting against pollution. 2. Standardized development of highway freight transport: the notice on further promoting road freight transport governance, opinions on regularization and institutionalization of jointed law enforcement on governing overloading by the Ministry of Public Security of Transport (trial implementation), and the notice of the Ministry of Transport and 14 other ministries on issuing the Action Plan for Promoting the Healthy and Stable Development of Road Freight Industry (2017e20). 3. Overall restructuring of freight transport: the Briefing on adjusting transport structure from highway to railway and waterway and improving comprehensive transport efficiency held by the Information Office of the State Council of the People’s Republic of China, and three plans for the further development of multimodal transport in the Yangtze River Economic Belt, issued by the general office of the Ministry of Transport. Below is a brief introduction to the four aspects of policy requirements for freight development. The policy of environmental protection is the Notice of the Three-Year Action Plan for Winning the Blue-Sky Defense, issued by the State Council, which requires freight transport to actively adjust its transport structure and develop a green transport system. In Opinions of the Ministry of Transport on Enhancing the Protection of Ecological Environment in an AllRound Way and Fighting the Strong Battle of Pollution Prevention and Control, the following requirements are specified: l l l

l

Building a green transport infrastructure. Promoting clean and efficient transport equipment. Deepening the innovation of transport technology and promoting the integration and upgrading of intelligent transport and freight operation. Adjusting the transport structure, reducing the volume of highway freight, and increasing the volume of railway freight traffic.

With respect to highway freight policy, two of the three policies are about strengthening the management of the highway freight market. They are respectively about the problem of substandard vehicles and overload vehicles, which reflects that the regulation of the highway freight market is not well implemented and that the government needs to strengthen supervision. In addition, in the notice of the Ministry of Transport and 14 other ministries on

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the issuance of the Action Plan for Promoting the Healthy and Stable Development of Road Freight Industry (2017e20), there are five governance tasks for the road freight industry: l l l l l

Reducing the burden of road freight. Promoting the innovation and development of the freight industry. Maintaining a fair competitive market environment. Improving production and operation conditions for employees. Strengthening the comprehensive control of the industry’s stability.

With respect to the adjustment of freight transport structure (modal split), one of the general directions put forward by the state is to promote “highway to railway, highway to waterway” for bulk cargo transport. The goal is to achieve a 30% increase in railway freight volume and a 7.5% increase in waterway freight volume, compared with 2017, within 3 years. Second is to promote the development of multimodal transport. It can be seen as a measure to achieve the goal of “highway to railway, highway to waterway.” When it comes to bulk cargo transport, we must strengthen multimodal transport such as rail and water transshipment to reduce the proportion of road transport. Generally speaking, these three policies are not isolated but interrelated. What these policies all have in common is the adjustment of freight transport structure. For the current freight transport structure, freight transport is dominated by highway, being the mode by which quite a large amount of longdistance transport of bulk cargo was undertaken, which is not suitable for the road transport. It is harmful to the environment and the healthy development of other freight modes. At present, the dominant position of highway freight transport in the freight market is partly due to the large number of overloading phenomena in highway freight transport trying to reduce the freight cost. Therefore, the policy of highway freight transport is not only to standardize the highway freight operation but also to lay a good foundation to adjust freight transport structure and protect the environment.

4. Future prospects The foreseeable trend of China’s freight transport in the future is intelligent development. From the construction of a freight information platform (which starts at the beginning of the 21st century) to the current national transport, the demand for information interconnection between different ministries and different enterprises will surely be better met. In addition, online-to-offline (O2O) freight, such as the O2O freight platform Lalamove, may become another hot direction for intelligent freight information in the cargo freight market. Regarding freight transport structure, the high proportion of road freight volume has become a major concern of the state. It can be predicted that the situation of large quantities of bulk cargo’s long-distance road transport will be

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reduced in the future. The development of multimodal transport can replace road transport to some extent, enabling all kinds of freight modes to give full play to their advantages. In terms of environmental protection, with the development of “highways to railways, highways to waterways,” the decline in the proportion of highpolluting road freight itself can bring environmental benefits. On the other hand, infrastructure construction is more energy-saving and environmentally protective. More clean energy vehicles will be used in urban distribution, and the environmental protection of freight transport can reach a higher level.

References Chang, L., Chen, H., 2013. Main causes of high logistics cost and the corresponding countermeasures. Journal of Chang’an University (Natural Science Edition) 15 (02), 27e30. Cai, Q., 2012. Research on the Relationship Between Commercial Logistics Cost and Main Influencing Factors. Beijing Industry University. Chen, Y., 2017. Analysis of the status Quo of development of port collection and distributing system in China. China Ports (03), 4e6. Fang, Q., 2016. Development strategies of rail-water container intermodal transport. Journal of Transport Systems Engineering and Information Technology 16 (02), 31e36. Gu, J., 2014. Research on the Characteristics and Market Structure of Road Freight Industry. Chang’an University. Guo, J., Wang, L., Liang, W., Liu, Y., 2012. A brief analysis of developing status of China’s logistics park and policy. Journal of East China Jiaotong University 29 (01), 117e120. Hu, Y., 2013. Research on Sustainable Development of Urban Logistics. Beijing Jiaotong University. Li, L., 2018. Development status and trend of port container transport in China. Modern Business Trade Industry 39 (19), 17e18. Ministry of communication of China (MOC) Road Transport Report [M], 2016. People’s Transport Press. Mu, H., 2011. Analysis of enterprise logistics cost and study on control measures. Value Engineering 30 (27), 16e17. Qin, P., 2018. Thoughts on several issues concerning the transformation and upgrade of highway freight transport in Chinaddanalysis of cost reduction and efficiency. Price: Theory & Practice (09), 139e142. Shi, X., Hong, Z., 2015. Evaluation, reflection and reconstruction of urban freight traffic management policy. Productivity Research (04), 89e92. The Fifth National Logistics Park (Base) Survey Report, 2018. Wang, Y., 2013. Current situation analysis and development countermeasures of railway freight transport market. Railway Freight Transport 31 (05), 11e14. Wang, Q., 2017. Research on China’s Modern Logistics Industry Policy Evaluation. Zhongnan University of Economics and Law. Wang, C., Ducruet, C., 2014. Transport corridors and regional balance in China: the case of coal trade and logistics. Journal of Transport Geography 40, 3e16. Wang, W., Wang, C., Jin, F., 2018. The classification of transport function of China’s coastal ports based on cargo structure. Geographical Research 37 (03), 527e538.

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Wei, X., Zhang, X., Han, B., 2015. Study on the reform and development of railway freight organization. China Transport Review 37 (01), 30e34. Yang, N., 2017. Research on Urban Freight Traffic Management Policy. People’s Public Security University of China. Zhang, P., 2012. Review and prospect of port container transport development in China. Containerization 23 (06), 4e8. Zhao, J., 2017. Study on current status of railway freight industry in China and its transformation toward modern logistics. Logistics Technology 36 (08), 14e17.

Further reading Jian, L., Li, D., Liu, L., 2012. Research on the evolution law of China container port system. Economic Geography 32 (12), 91e96. Ministry of Communications of China, 2017. China Road Transport Development Report 2016. People’s Communications Publishing House Co., Ltd., Beijing. Wu, X., 2016. Study on the development countermeasure of China’s rail and water transshipment under the policy of "one Belt and one road"ddtaking Ningbo rail and water transshipment as an example. Navigation (01), 63e68.