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Technical Assistance Consultant's Report People's Republic of China Technical Assistance Consultant’s Report Project Number: TA 4351-PRC November, 2005 People’s Republic of China: Policy Reform in Road Transport Prepared by CPCS Transcom CPCS Transcom CPCS Transcom CPCS TRANSCOM in association with and China Academy of Transportation Sciences For the Ministry of Communications CURRENCY EQUIVALENTS (as of 14 November 2005) Currency Unit – Yuan (CNY) CNY1.00 = $0.1234 $1.00 = CNY 8.10495 ABBREVIATIONS 3PL – third-party logistics (service provider) AAMVA – American Association of Motor Vehicle Administrators ADB – Asian Development Bank APPR – Action Plan for Policy Reform ASP – application software platform ATAC – Australian Transport Advisory Council ATC – Australian Transport Council BOT – build-operate-transfer CAAC – Civil Aviation Authority of China CATS – China Academy of Transportation Sciences CB – Communications Bureau CCMTA – Canadian Council of Motor Transport Administrators CCRS – Chinese Computer Reservation System CCTA – China Communications and Transportation Association COE – collective-owned enterprise COF – Certificate of Fitness CPC – Certificate of Professional Competence CPCS – CPCS Transcom Ltd CPSM – City Public Service Management CRTA – China Road Transport Association CVSA – Commercial Vehicle Safety Alliance DFID – Department for International Development DOT – Department of Transportation DST – double-stacked train ECMT – European Conference of Ministers of Transport EDI – electronic data interchange EIU – Economist Intelligence Unit EPA – Environmental Protection Administration EPB – Environmental Protection Bureau EPD – Environmental Protection Department ESAL – Equivalent Standard Axle Load EU – European Union FDI – Foreign Direct Investment FHWA – Federal Highway Administration FMCSA – Federal Motor Carrier Safety Administration GDP – Gross Domestic Product GMS – Greater Mekong Sub-region GVW – gross vehicle weight hrs – hours HSRI – Highway Science Research Institute ICAD – Industry and Commerce Administration Department IFTA – International Fuel Tax Agreement IRP – International Registration Plan ISO – International Standards Organization IT – information technology JV – joint venture kg – kilogram km – kilometer LCV – long combination vehicle LTL – less-than-truckload m – meter MCom – Ministry of Commerce MCon – Ministry of Construction MIS – Management Information System MOC – Ministry of Communications MOFTEC – Ministry of Foreign Trade and Economic Cooperation MOR – Ministry of Railways MOT – Ministry of Transport MOU – Memorandum of Understanding MPS – Ministry of Public Security NAFTA – North American Free Trade Agreement NBS – National Bureau of Statistics NDRC – National Development and Reform Commission NGO – non-government organization NHTSA – National Highway Traffic Safety Administration NLISC – National Logistics Information Standard Committee NLTS – National Logistics Technology Standard Committee NRTC – National Road Transport Commission NSC – National Safety Code NTC – National Transport Commission NTHS – National Trunk Highway System OBA – Office of Burden Alleviation p.a. – per annum PCD – Provincial Communications Department PDRC – Provincial Development and Reform Commission PFTECD – Provincial Foreign Trade and Economic Cooperation Department PICD – Provincial Industry and Commerce Department pm – person-months PPC – Provincial Planning Commission PRC – People’s Republic of China PSB – Public Security Bureau PSD – Public Security Department R&D – research and development RTO – Road Transport Ordinance SC – State Council SCOT – Standing Committee on Transport SDPC – State Development Planning Commission (now NDRC) SOE – state-owned enterprise SOP – standard operating procedure SPB – State Postal Bureau STL – Society of Transportation and Logistics t – tonne TA – technical assistance TAB – Transport Administration Bureau TAC – Transportation Association of Canada TEU – twenty-foot equivalent unit TfL – Transport for London TL – truckload TLI-AP – The Logistics Institute-Asia Pacific TMS – transportation management system TOR – terms of reference TPRI – Transport Planning Research Institute TRB – Transportation Research Board UITP – International Union of Public Transport UK – United Kingdom US – United States vehs/day – vehicles per day VWD – vehicle weight and dimensions WB – World Bank WDS – Western Development Strategy WIM – weigh-in-motion WMS – warehouse management system WTO – World Trade Organization NOTE In this report, "$" refers to US dollars. CONTENTS Page I. INTRODUCTION AND BACKGROUND 1 A. Introduction 1 B. Background and Objectives 1 C. Approach 4 D. Road Transport in China 6 E. Policy and Regulatory Framework 13 F. Sector Performance and Policy and Regulatory Issues 22 G. Alternative Regulatory Approaches 31 II. FREIGHT TRANSPORT 47 A. The Changing Role of Road Freight Transport 47 B. Issues in Road Freight Transport 60 C. Reform Options in Road Freight Transport 81 III. PASSENGER TRANSPORT 88 A. Issues in Road Passenger Transport 88 B. Reform Options in Road Passenger Transport 118 IV. A STRATEGY FOR REFORM 122 A. A New Approach to Road Transport Regulation 122 B. Action Plan 129 APPENDIXES 1. ADB ROAD SECTOR POLICY REFORM PLAN 145 2. VEHICLE INSPECTION AND MAINTENANCE REQUIREMENTS 147 3. TRUCK COSTS 149 4. BUS SERVICE LICENSING PROCEDURES 155 5. BUS SERVICE STANDARDS 158 6. OUTLINE TASKS FOR ROAD COST RECOVERY STUDY 161 7. OUTLINE TASKS FOR VWD AND SAFETY STANDARDS STUDY 163 8. OUTLINE TASKS FOR VEHICLE SAFETY COMPLIANCE PROJECT 165 9. ACTION PLAN WORKSHOP 168 1 I. INTRODUCTION AND BACKGROUND A. Introduction 1. This project, carried out for the Ministry of Communications (MOC), was to result in an agreed framework and action plan for reforming the policies and regulations governing road transport in the People’s Republic of China (PRC)1. In the context of China’s World Trade Organization (WTO) commitments – lowering tariffs, opening up markets, encouraging competition and integrating its economy with the world’s – it arose from concerns that the efficiency and quality of the PRC’s road transport system, though much improved in recent years, might still fall short of the needs of users and the level required to support the country’s rapid economic growth and transformation. B. Background and Objectives 2. China has seen unparalleled economic and social change since it began its reforms in the early 1980s. Spurred by a relaxation of investment controls, deregulation of many markets, easing of restrictions on private enterprise and a progressive withdrawal of the state sector from commerce, and supported by substantial investments in physical and social infrastructure, the economy has boomed: growth has exceeded eight percent p.a. for most of the last 20 years, with corresponding increases in the value and volume of external trade and foreign direct investment (FDI). In only the last year, between 2003 and 2004, transport demand in passenger-kms has grown by 18.1 percent and freight tonne-kms by 28.9 percent2. China’s share of world trade grew from 5.7 percent in 2003 to 6.9 percent at the end of 2004. 3. An efficient transport system is crucial to further growth. At the end of the 1980s users suffered from a limited, poorly-maintained road network, old and inefficient equipment, unreliable services, an emphasis on bulk movements of low-value commodities, lack of competition between providers and low standards of safety, productivity and customer service. Each mode – road, rail, inland waterway, air, coastal and maritime – was managed independently of the others. Policies and investments focused on achieving higher output with little recognition of the changing needs of the economy. Some deregulation had started in road transport, with state-owned enterprises (SOEs) permitted to offer services outside their main business areas and private operators allowed to transport state goods, but an efficient, competitive road transport system had yet to develop and services remained dominated by the relatively inefficient state sector. 4. In 1993, with ADB assistance, the Government commissioned a review of road transport3. It recommended separating the Government’s monitoring, regulatory and execution functions; an umbrella transport law to help integrate all modes; improved inter-ministry cooperation in tackling road safety; improvements at provincial and local government levels (better information systems, better monitoring of SOE performance 4 , partial relaxation of passenger fare controls, deregulation of freight tariffs, consistent licensing for inter-provincial operators, removal of barriers to out-of-province operators, easier market entry to the trucking industry and a new licensing system for freight forwarders); for freight transport SOEs, greater 1 Work on the project started at the end of February 2005 and was carried out over 20 weeks. 2 Source: MOC. 3 NEA Transport Research and Training in association with MVA Asia Limited, Efficiency Improvements in the Road Transport Sector, MOC and ADB, December 1994. 4 In this report, SOEs include enterprises owned by all levels of government, whether national, provincial or local. 2 management and operational autonomy, a re-equipment program, a more customer-oriented focus and inter-carrier agreements to improve back-haul load factors; a national training strategy implemented through industry associations; and pilot projects to reform SOE management and deal with labor redundancy issues. 5. A World Bank study examined road freight transport shortly afterwards5. It concluded that
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