THE CHINESE RAILWAY MARKET Facts, Figures, Players and Trends

2018

Available in English from 09th January 2019. Now you can also purchase the data annex in Excel format (see overview data sheets on page no. 6 for more information).

The Chinese market for railway technology will remain at a high level over the next five years but will not grow further. Following large and heavily subsidised investments into new rolling stock in 2018 and 2020, the OEM market will decline after 2020. The negative development in the OEM market is compensated by the dynamically growing After-Sales market. Due to overcapacity, Chinese companies have to put stronger focus on international markets in order to balance the slowing development in the national market.

In the new study "The Chinese Railway Market", SCI Verkehr provides a first-hand analysis of latest plans and developmental targets in the currently most important country for railway technology.

The Chinese railway technology market has a current volume of EUR 34 billion and will continue to grow by 0.6% up to 2022. The internationally most important railway technology market will mainly benefit from the growing After-Sales market (CAGR +7.1%). New business, however, will show negative developments (CAGR -3.4%), mainly due to decreasing procurements in the high-speed-segment.

Over the past ten years, China evolved into the largest and one of the most dynamic railway transport markets, worldwide. Large investments were made into the railway sector, the high-speed network in particular.

In 2010 and 2015, expenditures reached their peak values of almost EUR 120 billion, each driven by government economic stimulus plans. Since then a certain level of saturation has been observable and investments into railway technology in China have declined, however, still remaining at a high level, overall. Heavy investments into new rolling stock will be made once again between 2018 and 2020. In total, 900 new high-speed trains, 4 000 locomotives and 210 000 freight wagons are to be procured in the mentioned time period. SCI Verkehr expects a decreasing trend in new business afterwards.

The After-Sales market in China experienced fast growth due to massive fleet and network extensions realised in recent years and, compared to new business, gained in importance.

For manufacturers decreasing new procurement market volumes in the medium term induce the risk of significant overcapacity in their production plants, in particular for the three large state-owned enterprises CRRC, CRCC and CREC. A growing national maintenance market as well as more export to international markets can remedy this situation. In the last years, the enterprises were able to secure contracts in almost all regions of the world. Nevertheless, Chinese railway technology enterprises still are not of key significance in larger regions such as Europe, North America and the CIS.

In concrete terms, this MultiClient study includes: – Depiction of the structure of the Chinese railway market and analysis of important drivers – Presentation of development trends and planned projects – Trends and size of the market and future procurement potential up to 2023 – Analysis and forecast of the transport markets for freight and passenger transport up to 2023 – Description and evaluation of the demand for rolling stock and infrastructure services – Overview and profiles of the major players in the Chinese railway market

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– All in this study displayed figures and graphs concerning markets, installed bases and deliveries are transparently and comprehensively available – Apply the data sets for an individual evaluation and configuration or to access and supplement available market data

The market study is based on a number of sources of information from the press and discussions with experts which are continuously analysed, validated and entered into the SCI Database. SCI Verkehr GmbH is an independent consultancy company specialising in the technology and economics of transport. We have close connections to the rail industry, with consultants in a wide range of specialist fields. We have an extensive network of experts in Germany and abroad and we specialise in market and strategy aspects for the mobility sector. Our activities focus on companies in the transport and rail industry, logistics, public and private transport companies and transport and economics departments in public administration at federal, regional and municipal level.

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TABLE OF CONTENTS

1 Executive Summary: The Chinese Railway Market ...... 17 1.1 Trends and Drivers ...... 18 1.2 Market Volumes and Players ...... 20

2 Introduction and Methodology ...... 29 2.1 Objectives and Background ...... 29 2.2 Delimitation of the Rail Market ...... 30 2.3 Temporal Focus ...... 33 2.4 Market Analysis Methodology ...... 34 2.5 Railway Infrastructure/ Systems Technology Forecast ...... 36 2.6 After-Sales Market Forecast ...... 37

3 Market Structures ...... 38 3.1 Macroeconomic drivers ...... 38 3.2 Institutional Structure ...... 39 3.3 Operation Structure ...... 41 3.4 Funding Structure ...... 42 3.5 Investment ...... 43 3.6 Rolling stock OEM players and infrastructure/system technology contractors ...... 44

4 The Chinese Railway Transport Markets ...... 46 4.1 Rail Freight Transport ...... 47 4.2 Mainline Passenger Rail Transport ...... 50 4.3 Urban Rail Transport ...... 51

5 New Development and Upgrade Projects of Infrastructure ...... 55 5.1 High-Speed Projects ...... 55 5.2 Suburban Rail Projects ...... 58 5.3 Urban Rail Projects ...... 60

6 The Chinese Market for Infrastructure ...... 65 6.1 Network Development ...... 65 6.2 Track Systems ...... 67 6.3 Electrification ...... 70

7 The Chinese Market for System Technology ...... 73 7.1 Control Command and Signalling ...... 73 7.2 Passenger-Related Information Technology ...... 76

8 The Chinese Market for Rolling Stock ...... 79 8.1 Electric Locomotives ...... 79 8.2 Diesel Locomotives ...... 83 8.3 High-Speed Trains ...... 86 8.4 Electric Multiple Units ...... 90 8.5 Diesel Multiple Units ...... 95 8.6 Passenger Coaches ...... 97 8.7 Freight Wagons ...... 100 8.8 Light Rail Vehicles ...... 105 8.9 Metro Vehicles ...... 112

ANNEX

Annexe A: Company Portraits of the Top Manufacturers in the Chinese Vehicle, Infrastructure and System Technology Industry ...... 120

DATA ANNEX IN EXCEL FORMAT

DATA SHEETS OVERVIEW

1 Market overview 1.1 Market Volume (Pivot) 1.2 Market Share (Pivot) 1.3 Transport Performance (Pivot) 1.4 Market Volume (Data) 1.5 Market Share (Data) 1.6 Transport Performance (Data)

2 Railway Network 2.1 Network Length (Pivot) 2.2 Metro 2017 (Pivot) 2.3 LRV 2017 (Pivot) 2.4 Network Length (Data) 2.5 Metro 2017 (Data) 2.6 LRV 2017 (Data)

3 Installed Base 3.1 Installed Base Overview (Pivot) 3.2 Installed Base Age (Pivot) 3.3 Installed Base Overview (Data) 3.4 Installed Base Age (Data)

4 Additional Tables 4.1 Projects Overview (Pivot) 4.2 Additional Figures (Pivot)

3. Market Structures

[………]

3.5 Investments

The rail fixed asset investment increased from CNY 207 billion in 2006 to CNY 824 billion in 2015, representing an annual growth rate of 15%. After 2015, investments decreased slightly to CNY 732 billion in 2017, representing a decrease of -6% from 2015 to 2018.

[………]

China's fixed asset investment in railway [EUR billion] 120

100

80 i

60 Marktvolumen Neufahrzeuge und After-

0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Constant exchange rate 1 CNY=0.13 EUR for all years © SCI Verkehr GmbH

[………]

Investments in urban rail have been increasing heavily since recent years as well. The total investments in 2013 amounts to 216 billion CNY and in 2017 to 473 billion CNY, representing an annual growth rate of 22%.

[………]

5 New development and upgrade projects of infrastructure

[………]

5.3 Urban Rail Projects

Distance Construction City Project Title Project status in km period Beijing Metro Beijing: Fanshan line northern extension 10 2015-2019 Construction

Beijing Metro Beijing: Line 8 phase 3 17 2016-2020 Construction

Beijing Metro Beijing: Line 12, phase 1 24 2015-2020 Construction

Beijing Metro Beijing: line 16 40 2013-2018 Construction

Beijing Metro Beijing: Line 17 phase 1 50 2015-2019 Construction

Beijing Metro Beijing: Line 19 phase 1 22 2015-2019 Construction

Beijing Metro Beijing: Line 3, phase 1 22 2015-2019 Construction

Changchun Metro Changchun: Line 5 42 2020-2025 Planning

[….] [….]

[….] [….] © SCI Verkehr GmbH

[….]

8.8 Light Rail Vehicles

China Light Rail Vehicles LRV Trend

Units 2017 760

Average development 2017-2022 (p.a.) +15.7%  Stock Average age 2017 (in years) 11

Average volume 2016-2018 (EUR million p.a.) 310

 Market Market

for for new Average development 2017-2022 (p.a.) +6.6% vehicles

Average volume 2016-2018 (EUR million p.a.) 25



for for

after- sales

Market Market Average development 2017-2022 (p.a.) +17.2%

 Boom/Strong Growth  Small Growth ➔ Stagnation  Small Decrease  Clear Decline

Volume: > +5%p.a. +2 to +5% p.a. 0 to +2% p.a. -2 to 0% p.a. <-2% p.a.

Installed base: > +1.5%p.a. +0.5 to +1.5% p.a. -0.5 to +0.5% p.a. -1.5 to -0.5% p.a. <-1.5% p.a. © SCI Verkehr GmbH

Installed Base and Development of Stock

In large Chinese metropolitan areas, investments are primarily made into metro systems as a mass transport mode. Existing and planned LRT systems serve as complementary systems.

A market for light rail vehicles has been increasingly developing in the last five years in “midsized” cities and as a complementary system to metro networks in large cities.

Installed Base 2017 China [LRV units]

Hong Kong Changchun Dalian Shenyang Wuhan Suzhou Shanghai Bestandsübersicht HGV-Züge Osteuropa 2008 (Anzahl Beijing Huai An Shenzhen Nanjing Zhuhai Tianjin Guangzhou Qingdao 0 50 100 150 200 250

[….]

Trends in the Chinese LRV market: – Completely catenary free operation: Chinese cities increasingly choose light-rail transit completely without catenary, e.g. the Wuhan Doxian light rail T1, which went into operation in July 2017, uses LRV with ultra-capacitor from CRRC, which are completely without catenary. Further lines using completely catenary free operation are Wuhan Guanggu light rail line, Guangzhou Haizhoudao line, Huaian light-rail line, Wuhan Dahanyang district line rail line, Shenzhen Longhua New district line. CRRC Zhuzhou developed the first LRV with ultra-capacitor, which could run for 3-5 km without charging. In these systems, ultra-capacitors are charged at stations. – New energy vehicles: CRRC Sifang developed hydrogen LRVs. The first order came from Foshan in March 2017. In October 2017, a hydrogen LRV entered passenger service in Tangshan. The low- floor vehicle, built by CRRC Tangshan, runs on a 13.8 km line along parts of the Tang Xu railway. The LRV needs to be refuelled after 40 km. Refuelling takes 15 minutes. Maximum speed of the three-car vehicle is 70 km/h and it has capacities for 336 passengers, including 66 seated.

[….]

Suppliers

Besides CRRC, Shenyang Xingguan and Alstom delivered LRVs to Chinese cities between 2013 and 2017. Shenyang Xinguan is a private company with one contract for LRVs, so far. The company delivered to Changchun. Shenyang Xinguan does not have the technology for 100% low-floor LRVs. Alstom in form of its Chinese joint venture delivered LRVs for the new Shanghai Songjiang line.

[….]

Market Volume and Outlook

Key drivers of new procurements of LRVs are:

Drivers of Trend Brief description Relevance procurements (5 years) New development and A market for light rail vehicles has been increasingly developing since upgrade of 2015 in “midsized” cities and as a complementary system to metro  infrastructure networks in large cities. An advantage of LRT systems in China is the simpler approval process compared to metro systems. Cities or provinces can decide independently whether and to what extent they want to develop a new LRT system, and do not need the approval of the central government. The Chinese National Development and Reform Commission (NDRC), whose responsibilities include approving the construction of metro systems, has made general conditions for cities wanting to build a metro system more demanding. Previously, in order to build a metro Approval from the system, cities had to have more than 3 million inhabitants, a gross  central government domestic product (GDP) of more than EUR 12.7 billion (CNY 100 million) and municipal revenues of more than 1.27 billion (CNY 10 billion). Now the GDP and municipal revenues required have been tripled to over EUR 38 billion and 3.8 billion respectively, and the debt ratio of the municipal authorities cannot be higher than 120%. Many cities which planned to build a large metro system are not allowed to build metros anymore, e.g. Hohhot, Harbin. This new policy drives forward the light-rail market. Demand for modern Urbanisation, environmental problems, traffic jams and a shortage of  public transport parking space in cities pose obstacles for their future development. Relevance for procurements: = very high, = high, = medium, = low, = none 5-year trend:  = strongly increasing,  = increasing, ➔ = constant,  = decreasing  =strongly decreasing © SCI Verkehr GmbH

The current market volume for new vehicles amounts to EUR xx million per year and will increase significantly with a CAGR of 6-7% per year. The main driver of new procurement is the construction of new infrastructure.

[….]

Market Volume [EUR million] China - LRV 500

400

300 i Marktvolumen Neufahrzeuge und After 200

100

0 2015 2016 2017 2018 2019 2020 2021 2022 2023 New vehicles After-sales service

Important Current and Planned Procurement Projects

[….]

In the long-term (2024-2035), SCI Verkehr expects the OEM and After-Sales markets to grow further significantly due to: – Construction of new light rail lines – Increasing efforts to maintain the growing installed base – Replacement procurement of old vehicles

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