How railroad freight can thrive again in China

Earlier this week I wrote about tackling barriers to a modern, clean, and low-carbon intermodal freight transportation system in China. In this companion blog post, I want to shine a light on railroad freight in particular, as it’s a critical link in intermodal shipping, based on the experience with intermodal growth in the United States. This is important for China because there are fundamental deficiencies that underlie the recent underutilization of railroad in the country.

A report we published earlier this year showed that railroad used to be the leader in China’s freight system. It dominated for nearly three decades until 2008, but then its share started to shrink and by 2019, it was less than 20% (Figure 1). The average annual growth rate for railroad was less than 2% in the past decade, while at the same time, China’s entire freight activity grew about 7% annually. In 2019, trucks accounted for almost 80% of the freight tons and nearly 50% of freight activity in China.

chart shows share of freight activity across different modes in China over recent decades

Figure 1. China’s freight activity by mode, 1978–2019. Source: Shao et al. (2022)

This trend is concerning from an emissions perspective because the vast majority of trucks in China today are powered by diesel and generate health- and climate-damaging tailpipe emissions. Meanwhile, 74.9% of China’s railroads were electrified by 2020. If we look at the commodity level, trucks are increasingly used for shipping lower-value, bulk goods like coal, ores, and raw materials.

Against this backdrop, a series of strategies and policies in China since 2017 have sought to increase the share of railway or railway-centered intermodal shipping, including the three-year National Plan of Blue-Sky Defense and the Battle Against Diesel Truck Pollution, Outline for Building a Strong Transportation Country, the Outline for National Comprehensive Three-dimensional Transportation Network Planning, and the latest national action plan to peak carbon emissions, released in October 2021. But fundamental problems remain. Operational requirements such as shipping documentation and loading guidelines can vary within the railroad system, and the ability to connect with other modes, enabled by things such as on-dock rail facilities, is underdeveloped. Meanwhile, U.S. railroad freight was deregulated and marketized and has collaborated with other modes in moving the entire freight system toward more efficient, integrated, and greener operations. The U.S. experience can be illustrative for China, and we suggest the following actions to revive and boost the efficiency of railroad freight.

Use railroads to ship heavy, bulk products

Railroad has proven to be the most fuel-efficient and oftentimes the most reliable form of surface transport for large volumes of heavy, bulk products over long distances in the United States. Using coal as an example, its movement in all major producing regions in the United States has been dominated by railroad, with about 70% of the weight being shipped by train at least part of the way. Similarly, railroad transports more than 50% of the iron ore by weight.

Meanwhile, the share of railroad hauling coal in China grew from 26% in 2016 to 28% in 2019, thanks to policies urging shipping structure adjustment, but trucks still accounted for 56% of the system by weight in 2019. A similar trend is also found in the shipping pattern of iron ore. With the expectation of continued high demand for heavy, bulk products expected due to the dominant role of manufacturing in China’s economy, more hauling by railroad would reduce reliance on trucking. Indeed, our previous case study of modal shift at the Tangshan port found some significant benefits and estimated that switching to railroad for hauling iron ore from the port could eliminate about 30,000 truck trips daily and reduce use of diesel fuel by 80%.

Use railroads for longer-distance shipping

Railroads lead longer-distance shipping in the United States and accomplished most of the long-distance coal shipping, with the average shipping distance reaching 1,500 km in 2018. The average railroad hauling distance of iron ores was about 800 km that year and that of motor vehicles was over 1,900 km. The average haul length for railroad grew from 750 km to 1,700 km between 1960 and 2020 in the United States, partially the result of increased competition from trucks on shorter routes with the development of interstate highway system and the establishment of new land bridges between the East Coast and the West Coast. These made railroad more competitive in longer-distance shipping.

Even though there is a lack of detailed shipping information for selected commodities, Figure 2 suggests that China hasn’t fully taken advantage of railroad’s long-distance capabilities and comprehensive network. The average shipping distance of railroad in China increased from 485 km in 1978 to only about 716 km in 2018, when it was less than half the average in the United States. Given the similar land area of the two countries, the comparison highlights what could be great potential to adopt railroad more for longer-distance shipping in China.

bar chart shows shipping distances across air, rail, water, and truck

Figure 2. Average shipping distance by mode between the United States and China, 2018. Source: Shao et al. (2022)

Diversify the commodity types hauled by railroad,
particularly for higher-value products

More diversity is observed in the products hauled by the U.S. railway system than by China’s system, but our analysis of the shipping patterns of motor vehicles revealed that railroad in China has the potential to haul higher-value products with the right policy interventions. Such policies might include shipping structure adjustment and regulations on illegal modification and overloading when hauling motor vehicles. In addition, we noticed that about 10% of China’s railroad freight volume comes from container shipping and the growth rate of waterway-railroad intermodal is about 10% annually. Together this supports the idea that products hauled by railroad in China could be more diverse.

Engage closely with other modes for intermodal shipping

One of the highlights of U.S. railroad growth has been its engagement with intermodal: There was more railroad involvement in intermodal than there was railroad as a single mode of transport. This can likely be attributed, at least in part, to the framework of transportation planning and policy in the United States.

Due to lack of available data, it’s difficult to understand railroad’s engagement in China’s intermodal shipping. However, data collected from ports shows that containerized railroad-water intermodal activity has increased in the past couple of decades and transported over 6.8 million TEUs in 2020. Even though that is less than 2% of ports’ throughput, the quick increase, as shown in the earlier blog post, highlights the potential that rail could lead China’s intermodal development with improved engagement with other modes.

China’s railroad system has significant potential and could become the leader of the country’s freight system again. To help it become the backbone, China’s policies need to promote railroad for heavy, bulk products and long-distance shipping and invest in intermodal to support railroad’s increased activity and hauling of a more diversified array of products.