To survive as an international port, Shenzhen now relies on container railways to serve factories that have moved from Guangdong to more remote inland regions, according to a senior Shenzhen port official. “China’s industry is changing and factories are shifting inland,” Ma Yongzhi, Deputy Director General of the Shenzhen Port Administration, said. The exodus of factories from Guangdong to the interior made Shenzhen the worst-performing major Chinese port last year. Container throughput rose only 0.27% to 22.57 million TEU, according to the Shenzhen Ports Association. In comparison, container throughput in Shanghai, the world’s busiest port, increased 9.2% to 31.74 million TEU last year, the Shanghai International Port Group (SIPG) said. Ma said Shenzhen’s port was aggressively building rail links to the interior to transport containerized cargo for factories there. The port had 15 container rail connections to cities, including Chongqing and Kunming, Ma said. This year it would open two new container rail lines: to Xian, the capital of Shaanxi province, and Zhengzhou, the capital of Henan province. Kerry Logistics was planning or building six logistics centers in central and western China, including a 40,000 square meter logistics center in Zhengzhou to be completed in March next year. Kerry Logistics started operating logistics centers in Chengdu in 2009 and Chongqing in 2010 to tap inland cities. One example of an interior city benefiting from the inward shift of manufacturing is Chongqing. Last year, it saw the biggest increase in international trade in China – a 140% increase to USD29.2 billion, according to the Chongqing government. By comparison, China’s international trade rose 22.5%. Willy Lin, Chairman of the Hong Kong Shippers’ Council, said Shenzhen’s container rail business was now threatened by a direct rail link between Chongqing and Europe, which had been operating for the past year. Lin said it took 14 days to transport cargo by rail to Europe from Chongqing and 21 days to move freight from Chongqing to Shenzhen and then ship it to Europe. The cost of transporting cargo by rail from Chongqing to Europe was roughly one-third the combined cost of land transport to Shenzhen and shipment from Shenzhen, Lin added. At present, less than 1% of China’s container throughput is transported by rail, the South China Morning Post reports.

China’s railway system extended a further 169.4 kilometers eastwards when the first cargo train left Fuyuan station in Heilongjiang province. Goods can be shipped from Fuyuan to Japan, via Russia, in six days, three days less than by ship from Dalian in Liaoning, and two-thirds cheaper.

The Railways and Transport Ministries are jointly launching six container rail projects linking Chinese ports to the country’s interior. On October 12, the two ministries launched the first container rail project linking Lianyungang port in Jiangsu province to the border town of Alashankou in Xinjiang province. Five other container rail projects are in the pipeline: Shenzhen to southern and southwest China; Tianjin to north and northwest China; Dalian to northeast China; Ningbo to eastern China; and Qingdao to Zhengzhou, the capital of Henan province in northern China. “This is a big positive move and there is a high likelihood it is part of the reform of the Railways Ministry. In the past, the Ministry didn’t cooperate with anybody because it was like an independent kingdom,” JPMorgan Analyst Karen Li said. There are 10 container rail corridors in the country, but the development of the container rail network linking ports had made limited progress, said James Wang at the University of Hong Kong, mainly because of cooperation problems between the two ministries. He said the mainland’s container land transport network was so underdeveloped that there were few links further than 200 kilometers from a port. At present, less than 1% of China’s container throughput is transported by rail. The two ministries are targeting an annual growth of 20%. “This has big significance for the transport sector. There is a shift of manufacturing to west and central China, which must be linked up to global markets,” said Luo Ping, Director of Transport Planning at the Institute of Comprehensive Transportation of the National Development Reform Commission (NDRC).

China’s ports need more rail connections for containers to relieve traffic congestion and pollution, but a major obstacle to expanding rail container services is the powerful Ministry of Railways, officials say. “In future, rail will be more important for China’s ports. It’s impractical for large ports like Shanghai to transport all of their containers overland by trucks,” said Luo Ping, Director of the China Research Institute of Comprehensive Transportation at the National Development and Reform Commission (NDRC). The need for rail container services had increased because of the central government’s policy of shifting manufacturing inland from coastal areas, Luo said at the Port Planning and Design China conference in Shanghai. Only about 300,000 containers per year are transported to and from Chinese ports by rail, less than 1% of container throughput. Trucks hauled the vast majority of containers to the coast, Luo said, and rail containers had not been given priority in the Ministry of Railway’s latest five-year plan. Without reform, it will be very difficult to expand rail container services, he added. The Shanghai municipal government is considering building rail links to city ports such as Yangshan and Waigaoqiao to help relieve severe congestion problems in the city, said Cao Hongyu of the Planning and Construction Department of the Shanghai Municipal Transport and Port Authority.

China plans to spend at least USD1.3 trillion over the next five years to ease transport and freight bottlenecks, as more and more manufacturers are moving production inland to avoid rising costs – including wages – in the coastal areas. The trend has strained China’s ability to transport goods within the country. Railway and road capacity are therefore being expanded, drawing a fixed-asset investment of USD569 billion over the past two years. Over the next five years China will spend as much as CNY3.5 trillion on railway construction, CNY750 billion on rail rolling stock, CNY3.5 trillion to CNY4 trillion on highways, CNY300 billion to CNY350 billion on airports, and CNY900 billion on ports, according to Macquarie. China expects to continue increasing spending on transport and infrastructure this year but at a more cautious pace, according to the Ministry of Transport. The central government plans to increase its spending on transport, excluding railways, by 10.3% to CNY286.7 billion this year, a slower increase than last year’s growth of 19.3%.