[300613.EN.LOG] China Railway Authority Faces Fierce Competition In Express Market

EXPERTS say the new China Railway Corporation, founded after the Ministry of Railways was disbanded, will find it hard to break into the highly competitive express delivery market, Xinhua reports.

The plan to roll out same-day or next-morning service based on high-speed trains for small parcels. Door-to-door service has attracted wide attention.

Difficulties stem from the character of rail transport itself, according to Xu Yong, chief consultant at the China Express and Logistics Consulting website.

Mr Xu said high-speed trains are not designed to carry cargo, therefore the railway express service is only an experiment on which the authority should depend how to achieve a balance between passenger and cargo.

For shipments over 1,000 kilometres, rail is not as good as air and for those over a few kilometres road is more flexibility.

State-run China Railway Express posted CNY8 billion (US$1.3 billion) last year. Express contributed CNY1 billion, which represented only one per cent of the entire express market.

Li Hongchang, a researcher from Beijing Jiaotong University, said the reform is a good start but it exposes the railway authority to problems.

First it must update its information system to enable customer real-time tracking. Second, it must devise flexible rates to meet changing market conditions. Third, it must offer scheduled services to enhance reliability.

Mr Li also said the rail express development is an important sign of innovation, noting that the advantage of lower cost, railway-based express service will be welcomed as a complement to existing services.

In fact, before the reform, Guangzhou Railway Corporation has started a pilot express service using high-speed trains from Shenzhen to central China Changsha in May. According to the operator, rate per kilogramme for the service is half that of air freight.

Railway is irreplaceable for the transportation of bulk cargo of large quantity and oversized cargo, such coal and machines. But these goods are low in added value, while express service is much more lucrative with smaller packages.

China e-Business Research Centre's statistics show that at present, 80 per cent of the domestic express parcels are moved by truck, 15 per cent by air, those by other means including rail come in at less than five per cent.

But railway is lower in cost than by truck, and has wider network coverage than air transportation. This will support the railway's plan to set foot in the express market.

Source : HKSG.